Investing - The Basics

[kennynah]

Note: I am not from nor advertising for the below brokerage.

Poems (http://www.poems.com.sg) offer a product call Share Builders Plan - abit like dollar cost averaging / regular savings plan of unit trusts, but this one allows you to buy units in STI component stocks vs. saving up $15k to buy 1lot of DBS, you can do so just with $100 a month.

the more accurate terminology is Dollar Lost Average

The simple idea about investing is when an opportunity arises, you have the means to seize it...like when you chance upon a property that you like, has a nice postal code and going at a price that is significantly lower than historical data....

It should not be confused with chasing after an investment just becos one has set aside money every month... must invest just becos one has that extra $100 every month meh? so, even cant find a good deal....nevermind lah...got extra money, so dump it somewhere lah... is this meaningful??? eg...DCA on a stock just bcos you have some money to average out the entry price..

[winston]

DCA works only when there's a long period of uptrend in the markets, say 10 years.

As many people were not able to call the uptrend since March 2009, as well as the Downtrend for a year before last November, DCA is a simple way for them to invest.

If your luck is bad and you hit a rough patch for 10 years, it's just too bad then. However, I think people will normally pull the plug from DCA after a few years of rough patch ..

[kennynah]

I remain sceptical about dollar lost averaging technique. It's an undusciplined way of investing. Eg, suppose I bot into a stock at $1, n it went against me by 20%. instead of admitting that I've been screwed, I pour in another equal capital sum at 80cts, thinking my average entry is now 90cts, n totally ignoring that my exposure is doubled as well. Now if the stock tanks another 20%, I m doubly screwed. I tell myself, f**k lah, what's another sum to buy in at 64cts, again thinking by dollar cost averaging, I can further bring my entry price down n again conveniently throwing the added risks to the wind ..
Anyways, I'm nagging

[HengHeng]

cannot like that say leh ..

i kept 10lots of citi at 3 bucks i thot cheap .. then i see citi at 1 buck .. wah i tell myself mai tu liaoz .. wack 50lot .. to me i think at most lose 80k nia .. but basically if never average . .now still suck thumb leh ..


at that time i never had enough foresight to wack harder ... if not .. i can wait and collect dividends for the rest of my life .. LOL

[winston]

Dear Heng Heng,

I think you are averaging down which is a bit different from Dollar Cost Averaging, which puts aside a fixed amount of money, to buy units of a Mutual Fund.

Take care,
Winston

[HengHeng]

oh ok .. LOL sorry misunderstood.

[memphisb]

I rememered reading sunday times a couple of months back.

There is a small column on dollar cost average.
basically its like what winston menstioned. Putting aside $ from salary, spreading your purchases out over the years. This reduce the risks rather then dumping lumpsum onto a counter 1 shot by using investment/over time to your advantage.

Averaging down is risky and usually FA ppl used it. Buy cheap now. WOW cheaper now, by even cheaper.
1 lot $1 last week. this week 1 lot $0.80 bargain leh! U buy and end up with 2 lots at average price from $1 to $0.90.
personally i don't recommend this for trading. Suicide. Reason is you are pumping in more capital (MORE RISKS!!!) and who knows what level the price will drop?

just some thoughts

[HengHeng]

lol .. since you mention risk ... i think i would need to explain myself ... when entering any trade i do .. i clearly know what is the potential upside/downside that i would be involved in .. meaning i would know the risk ....

For those newbies , the common mistake is being overconfident thinking they know everything when they don't even know what to do when bets goes against them as they are not prepared to take the risk mentally and methodology... ( mouth say can take it but heart never agree ) ... leading to irrational decisions often leading to huge paper losses ( why i say so .. cause they won't admit they are wrong .. people will always say .. look in 5 yrs look in 10 yrs

Issue is . 5 to 10 yrs only recover and win abit while others have already doubled or tripled their fund already .. because they recognise the risk and did appropriate measure to prevent huge losses , i'm not saying that buy and hold is wrong just only that it is not the only way to rome ..

when i increase my bets .. i'm always prepare to lose everything .. LOL ai kia mai pua .. ai pua mai kia

But issue is one must be proficient on what they do .. i did what i have done as i'm a rojak trader .. LoL

Basically as i was timing the markets . i found that prices were at prices that were worth a bet ... why so ? prices are at discounts in valuation basically their worth (whatever method you wanna call it). .. i mention that one can buy 10 lots of cit ..to gamble for their retirement in the future .. so i have backing to prove my stand ..

DO NOTE ... i mentioned gamble .. it doesn't mean i'm not putting all my eggs in one basket .. it is just a form of managing risk ...

the issue with investments is not 1+1 = 2 .. it is not a scientific formula to everyone .. sometimes some people have other methods other than the common quantitative methods ..

Sometimes , the combination of two risky investment might actually reduce the risk of the portofolio as compared to keeping a relatively safe investment .. (what happen if it fails)....... at least with 2 or more investments u spread out ur risk ..

Just like when people invest .. they usually play SHOWHAND. . sure dump everything in .. to me .. maybe can when you are small but when the funds are substantial .. it might backfire. .

[winston]

If there's any Newbie out there, I would recommend that you pick up a copy of "Shares Investments". It cost only Sin$6.

[winston]

As the titles are filed alphabetically, I will need to change the title of this thread. It is now filed under "G" and has no relevance to the discussion.

How about, "Newbie Investing" ? If there's no objection, I will change the title in the afternoon.

How about Investing 101 - Getting Started...

"newbie" sounds derogatory ...just a suggestion... [/quote]

Sorry, I did not see your post until now.