Good Investing Lessons

This is an article that I read on 26th September 2012. It has been over a year now and I suddenly remembered. I'd posted this last year with some other predictions from CNBC etc. During then, I was very fascinated listening to these experts. They are so confident and so logical. I always admire their ability to "read" the market and manage hundreds of millions of dollars of other people's money. So of them managed billions of dollars. Then I thought what if they ever go wrong? Won't they lose a lot of money? So, I think it would have been interesting to remember what they said and then we verify later. On 26th September, the S&P 500 index closed at 1433.32. One year went on and it went up another 19% from there. Below is S&P 500 over last one and a half year. As we can see, the market has still been a bull. Over the one year period, the S&P 500 index did correct itself. However, it was a <6 20="" 25="" advice=""

Some interesting articles about investing in current climate: Should you be scared now? http://www.fool.com/investing/general/2012/09/26/should-the-dows-down-streak-scare-you.aspx CNBC: Greece Trumps China - http://www.cnbc.com/id/49179175?__source=yahoo|headline|quote|text|&par=yahoo http://www.cnbc.com/id/49183818 - Beware of coming 25% correction Let's keep these news and monitor what happens a year later.

Some very fundamental rules that I have not be able to keep with: 1. Diversify and invest Thinly across Diversify your stock portfolio over a basket of 30 over different counters across at least 5 different sectors. Warren Buffet said Diversification is only for those people who does not know what they are doing. Let's fact it. You are not an expert. Risking too much on any stock investment is a recipe for disaster, even for the sophisticated stock market investor. Keeping your individual share investments small keeps your capital pot safe and lowers the stress that can make investing unpleasant. Once you have 30 stocks you can grow the scale of each investment, but until that day stay small.  2. Take your time and do your research Never invest your money on a share tip. Stock investing is a skill you build up over time and with improvement your returns will grow. Share tips are empty investments and many unsavoury types try and lure you into investments with bad

There is a lot of talk about Spanish sovereign debts recently. I came across a research paper which I think is very useful for me and wish to share it here. This is taken from www.fundsupermart.com, an online fund broker where you can purchase funds form various fund managers. This portal provides some research and comparisons and it is essentially a self service portal. From the chart provided, we can see that there is a problem for Spain to service their debts for the next 4-5 years if the debts are not re-structured. With this kind of risk, no sane investors would want to risk their money to buy Spanish bonds. They can only turn to European central bank for bail out. The blue arrow is a fictitious line I draw assuming re-structuring is going to happen. Essentially, they have to move the payment of capitals into next 5-20 years to be affordable. In addition to that, they can't make additional loans. This is just taking a very simplistic view of the situation. To have that hap

Have you experienced buying stocks when the market has just made major advances or the counter has just moved up higher? Only to face the selling down the next couple of days? Well that must be a lot of of regrets there. Well, the consolation is that you are not alone. I frequently made the same mistake - huh, talking about not making the same mistake twice. This is one monster inside of me that is so difficult to kill. So often, I had forgotten about the commonsense of waiting for market to pull back before entering. This kind of emotion arose from a mixture of fear and greed. Greed in wanting to chase the profit and fear is worrying that the price may go beyond comfortable purchase level. On the hindsight, this is so silly. Pure silliness and nothing else. How many times you have read in the book about where to enter and when to exit. All the theory sounded so simple and logical. But, when at the thick of things, the price movement in the market can be so powerful and dominating ov

There has been talks about end year rally during the earlier parts of this year. Particularly in February to March period when the market was suffering from 'temporary' set back. During that time, even though the European Debt crisis were looming, the Asian economy was still booming. However, as the time passes, the European Debt crisis becomes more apparent. Countries were finding it more and more difficult to cover up. More facts emerge and picture became clearer. The earlier investor pull back and market began the down trend again. In such time, we will invariably turn to tools that we think will help us to foresee such events. This is where macro economic theory comes in. However, for traders who are not well read on such topics, they want to use some thing faster and easier. Then, Technical Analysis comes into play. Using technology, TA can be very fast and handy. Here is a classic example of using TA: http://www.etfguide.com/research/705/8/The-Chart-That-Trumps-Anal