How I started serious investing in the stock market?
In 1983/4 when China gave notice to the British Government to recover the sovereignty of Hong Kong, the stock market crashed and the Hang Seng index dropped to 600. There were so much of cheap sales for me to buy. When China agreed to give another 50 years extension, the market rebounded sharply. I made so much money that I bought 46% of a small stock broking company called “Kaiser Stock and Share CO Ltd”. That was how I started serious investing in the stock market.
The key to my success in share investing is my ability to control my emotion of fear and greed. I was not afraid of the Communists taking over the rule of Hong Kong.
Since then, I found so much fun and enjoyment in investing in shares. Here are all the knowledge I have acquired during my long experience in the stock market which I like to share with you.
- Long term investors, like Warren Buffet make more money than short term investors.
- Fund managers often cannot beat the stock market index.
- Professional stock market analysts always write articles to favour the companies they visited. Remember all CEO and CFO will always say good things about the companies they manage. You must always read analysts’ recommendations with a pinch of salt.
- Day traders who trade too often lose money due to transaction costs.
- Financial and technical analysts always can make money, but they can make more money if they look at the company’s business and its profit growth potential.
- For FA and TA practitioners to be more successful they should have a good business sense to take advantage of a sudden trend reversal instead of waiting to buy when the price moves above the 70 day moving average.
7 Remember the stock market is not like your rich father who would simply pay up your debts. You cannot get rich if you are stupid.
8 To be able to make money from the stock market, you must outsmart the losers.
9 There are more losers than winners. Losers are born every day. Otherwise, there will be no more ikan bilis for big sharks to eat.
10 The movement of any share is due to the number of the buyers or sellers. If there are more buyers than sellers the price will go up but if there are more sellers than buyers, the price will come down.
11 If you have been losing money, you must change your investment method. If you continue to lose money, you must stop investing because your brain is not wired for share investment.
12 You must develop the ability to control your emotion of fear and greed to maximise your profit.
13 You must not fall in love with the shares you have bought. You must sell to take profit. You must always bear in mind that profit is not a dirty word. When to sell is always a puzzle.
14 I must admit my mistake in being so bullish on Hengyuan. I wrote a few articles with good intention to help readers to make money. As a result, I did not sell when it went above Rm 19. I am too egotistic. But when I see a sudden trend reversal, I started selling. I have to sell at lower prices.
15 When there is good news, investors rush in to buy the stock until it is overpriced. When there is bad news, shareholders rush to dump their holdings as if there is no more tomorrow.
Why should the price keep falling? Although the 4th quarter result will be good, the profit for 2018 will be affected by lower crack spread, down time for upgrading the refinery and payment of tax.
This is a classic case of a stock that is oversold. Based on PE ratio, it is still very cheap. I still have some Hengyuan shares and I have stopped selling. I may buy back when there is a trend reversal.
What is luck?
To be successful in share investment you must have luck. What is luck? You may think that luck comes from the sky or heaven.
No! To be able to make money from the stock market you must outsmart the losers.
To outsmart the losers, you must have luck and the definition of luck is when preparation meets opportunity.
Preparation means that you must know the fundamentals for share selection, some knowledge of financial, technical analysis, good business sense and the ability to control your emotion to think logically.
In the stock market, the share price cannot see you and you cannot see your own face.
These Mark Twain’s quotes are relevant for everyone especially those stupid commentators on i3investor:
“Keep away from people who try to belittle your ambitions. Small people always do that, but the really great make you feel that you, too, can become great.” – Mark Twain
“Better to keep your mouth shut and appear stupid than to open it and remove all doubt.” – Mark Twain
“Kindness is the language which the deaf can hear and the blind can see.” – Mark Twain
“The fear of death follows from the fear of life. A man who lives fully is prepared to die at any time.” – Mark Twain
Good luck to all investors.