Investment Myths Busted

[LenaHuat]

Hi La Pap

Yo, it's like " encyclopædia" in its traditional form. Ishak who is "99" will understand lor .
It's difficult for me to re-learn what I had been taught during the British imperialist era.
But will try

Li Kong Si Mi?

Yo, Ishak, U can't be educated in Xiamen or Guangzhou, can U ??
Likely to be Malay College at Kuala Kangsar?? Right??

[la papillion]

hmmm those that can do , do the work .. those that can't do all the talking.

You don't see warren buffett appearing on t.v everyday to tell you how to trade neither do you see geoge soros doing the same thing though he wrote alot of books recently.

All the ang mor damn chim i read until headache..

HengHeng, but these days, WB kept coming out to talk talk talk. Quite unlike his earlier style Jim roger is the talk talk type, I suppose. I heard he bought into SIA recently.

[HengHeng]

WB talk talk but did he tell you what he bought?

Usually if u see his interviews , he talk about alot of other issues except his investments plans as well as what is he investing next.

Talk is after he has done everything or after he has no intention of doing anything then he talk. It is slightly different.

As for Jim Rogers , the way he operates is slightly different. He is a very "long trend" person. Very different from soros which is more of a speculator.

So it really has to depend on which styles people use in order to quantify whether they are doing all the work at the moment or actually just talking rubbish after they are already done.

[millionairemind]

Investment Myths - 6. You can't beat the market

Like Apong mentioned before, if we want to grow our wealth, we MUST NOT BE looking at beating the market... Y??? Cos' what is the point of you returning -20% this year and the market returns -30%????

We must be looking at ABSOLUTE returns... I am sure you have heard about all the stories about how Compound interest is the eight wonder..

Of course it is, it will work ONLY IF YOU ARE MAKING MONEY IN THE MARKET EVERY YEAR!!!

If you can compound $100,000 at 15% a year, you are looking at more than $6MM after 30 years, hypothetically speaking

Here is something I have posted before, a fund run by Bill Miller... He beat S&P500 15 years in a row.. so WHAT? his average 10year return is 1.19%. The 10-year return for S&P 500 is only 2.5%!!!

The $9.7 billion Value Trust's primary shares are down 30.86 percent in 2008 through Monday's close against the negative 13.20 percent return of the S&P 500 index and is the worst performer in its category, according to Lipper Inc data.

Over a 10-year period, the fund has returned 1.19 percent annualized against the index's 2.5 percent return. The underperformance for the 10-year period began in May and has gathered steam as the fund is now in the 56th percentile compared with 37th at end-May, as per Lipper data.

I am NOT DERIDING his returns... I am just showing you that we should not be just looking at beating the market, we should be looking at absolute returns yearly so that we can compound our money.

Many of us have been brainwashed with buy/hold, invest for the long term... kind of propaganda. A serious bear mkt for a couple of years will do SERIOUS damage to your ability to compound your money.

If you are long side bias (like I am but I am learning to be neutral this year), you might want to learn to figure out how to time the market.

OK, I know, someone will come in and say it is not easy..

Nothing is easy in making money from the market... it involves alot of hardwork and patience.. but it is worth it.

I have been messed up in my head before by all the propaganda out there regarding the impossibility of timing the market... that is Y I lost ALOT of money during the 2000-2002 bear market.. I do not want to see the same happen to you..

You are free to choose....

Good luck.

[Musicwhiz]

Well MM,

It depends on valuations you bought at, and the sustainbility of the business model behind the company.

Sorry if I may offend with my views, but I tend to see businesses rather than markets. If a business is doing well, I would want to own it for long-term. To me, it's pretty simple.

[HengHeng]

It is ok to be "long" biased just buy different product to hedge.

i can long on stocks .. and long on puts to hedge.

Just like buying insurance.

[kennynah]

musicwhiz :

the market is a culmination of businesses listed publicly...how can one detach market actions from businesses?

markets will do well overall, when businesses do well overall and vice versa. they are a pair of siamese twins; they are inseparable. it is impossible for a business to do well when the overall market indexes underperform over an extended period of time. the fact that indexes performs poorly is a direct reflection of how businesses are performing... the index is nothing more than a mathematical computation of business valuations.

there is nothing more accurate that the market stating the economic conditions under which these businesses operate. and there is nothing more inaccurate to imagine that businesses overall do well and yet market tanks...this is a not logical even to a primary schooler.

looking at businesses and ignoring the consolidated market actions, is taking an inaccurate macro view.

it is not my intention to offend you with my opposing views, but it is my intention to debunk your incorrect notion.

we can debate, that's fine by me.

[millionairemind]

Well MM,

It depends on valuations you bought at, and the sustainbility of the business model behind the company.

Sorry if I may offend with my views, but I tend to see businesses rather than markets. If a business is doing well, I would want to own it for long-term. To me, it's pretty simple.

MW,

It is never an offence hearing from you...

As I mentioned before, different strokes for different folks. We all need to figure out a way to make money from the market that is consistent with our personality.

My posting is to help newbies out there who are still undecided.

We are only as free as our choices... and once we know what they are, we can choose

Cheers,
mm

[millionairemind]

Investment Myth Busted
8. There is a PE where the stock will not go any lower. FA is the only way to invest. Cheap stocks do get cheaper. (Nothing against FA here but it does not tell you about mkt sentiments)
Newly added - There is a PE where the stock will not go any higher

First and foremost, I am a FA practitioner at heart. I won't invest/trade a stock before I have time to go thro' their balance sheet and do a reasonable estimate of their growth.

But then hor, I am also a CANSLIM practitioner. That is where my TA part Mr. Hyde comes in. In my view, we can do all the FA we want, BUT THE MKT ALWAYS KNOWS BETTER...

A simple question. If a stock you are looking at has a PE ratio of 6 and growing at a reasonable 10-15% a year, with low debts, would you buy it??? Sure, most FA will say... Remember, the value of a company is what the market prices it at... Here is a chart of China HongCheng. (Stock data info taken from SI)



If you have bought it at a PE ratio of 6 around 50cts... you would have lost 60% OF YOURE INVESTMENTS BY NOW!!! Would you buy more at say 50cts?? How about 40cts?? 30cts??? It is now 20cts and change. It has a PE ratio of around 3 now. And the SAD news is that this is NOT A MONEY LOSING COMPANY!

The 9months earnings so far is up about 25% YOY. The earnings is of course decelerating but not the company is not making a loss... that is what I mean by the market always knows better and without institutional support, the stock will not move.

http://info.sgx.com/webcoranncatth.nsf/ ... penelement

Compare this to Wilmar... When it burst on the scene 2 years ago, it was trading at $1.0.. At its peak, it was $5.. now it is around $4.20... When it was trading at $2.4, it has a trailing PE of 45...



Yes, we can argue till our face is red that we are comparing apples to oranges...

Remember, without institutional support, the stocks in your basket CANNOT MOVE!!! Who is going to buy from you to push it higher???

It has always been supply and demand that determine the stock prices.. The value of your company depends on the price the last seller is willing to sell at. If he is not willing to let go and there is enough demand, the price rises.. simple economics.

Of course we can say that mkt can be depressed... if that is the case, Y only China HongCheng and not Wilmar?? China HongCheng does not have any institutional support, plain and simple.. that is the reason Y it keeps drifting down, just due to sheer gravity..

Maybe my examples here are not good enough to illustrate my points on the futility of just using FA alone.

I am very sure you are aware of tons of drifting stocks on SGX that keeps getting lower and lower....

My examples are just to illustrate on the fallacy of buying cheap stocks with the thinking that it cannot go any lower or shunning expensive stocks thinking that it cannot go any higher.

Just be careful out there... supply and demand always determine the value of your company.

[HengHeng]

But my f.a always teaches me , every stock is only worth how much it weighs .. a few gram of paper.

The value to me is always zero as assuming if trust is not there how can u trust that people will give u back the money just look at clob.

Therefore the stock price is just how much others are willing to buy from you for that piece of paper.