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Rejoice in a Stock Market Correction
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KiLrOy
Master |
20-Aug-2007 22:35
Yells: "I buy only what I can see." |
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Heya nothing to be sorry abt. I personally enjoy your conservation and insights and at times also get to see the hard to believe panicky side of Elf. haha. Personally I believe there are more and more speculators out there then REAL investors hence the the volatilty and since the market is sooooo complex, to know it all and why, its impossible. I just go with the flow but a step slower. I will visit the basics of investing again and again and again and state my objective for investing in SG stocks. This is what guard(ed) me from letting my emotion rule over me most of the time. When I pasted this articles, I am actually trying to remind myself and to rid the emotion of fear when a market turns bull with all hells break loose. So I actually posted it for my sake and if it does helps someone along the way, good for that person. ;) |
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elfinchilde
Elite |
20-Aug-2007 21:41
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lol. solly. tend to get worked up over the rich-poor divide and the inequity of wealth distribution. haha. plain joe's problem is lack of knowledge, of techs and FA, of the way things work, of the mechanisms. and i'll admit, at times, laziness and greed. want easy money. human nature i guess? but a potent factor in determining loss or gain. btw, is it just me, or don't you guys think the sti is a super reactive 'indicator' to global news and other indices? like, the thing doesn't have a mind of its own....dow up, nikkei goes 3%, HSI goes 5% and our dear sti chiong arrhh to 6%. dow/nikkei/hsi drops, and sti drops super lot more. does it mean our stocks are more globalised (aka more foreigners buying in, hence more susceptible to volatility), or are we just more wired hence faster on the trigger, or just more kiasu/kiasi/kia zheng hu? :P |
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KiLrOy
Master |
20-Aug-2007 19:53
Yells: "I buy only what I can see." |
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Aiyah, pls stay within the context of the article. There are alot of assumption you guys have factored in but what the author is saying is plain simple - Taking advantage of volatility in the market. If plain joe has problem buying A SINGLE value company during those period simply becoz he lacks the fund or was bloodshed prior to it and could nto afford more, plain joe needs to examine his fund strategy on purchase stocks. Perhaps he could consider DCA (another topic altogether). Perhaps he could consider buying mutual fund which consist of a basket of valued stocks OR employ DCA for his mutual fund. No one says value stock is cheap and further more, SGX only allows purchase of MOST stock sin 1000 shares per lot unlike in the US. So weigh your disadvantage and devise your fund/money strategy on a value appropriately. <fullstop> |
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elfinchilde
Elite |
20-Aug-2007 18:35
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hehe. elf agrees with nickyng. you need wealth to build wealth. take a simple count: buffett's average ROI is 15% per annum, over 40 years. everyone thinks that's fantastic since they see the billions. but put the scale in perspective. if you start wth only 2k, by end of 40 years, what you get is 535k. on the assumption that your 2k could even go that far in the first place. more often than not, as an average investor/man on the street, your money would be stuck, like now, and even if you want to do the averaging down that FA people are so fond of (read: accumulation), you need extra funds. which the average person will not have. as for value investing: let's shed the light on the mathematics and put the myth to rest: there are a total of 1602 counters traded on the SGX. not sure abt the number of companies. but then: how many of the 1600 stocks actually get delisted? ie, what, actually, are your chances of going nil? practically none. so if you're a WB follower, what you do is to get 'good' stocks, at penny levels. say 2c. in a bull year, every damn thing goes up, isn't it? so your 2c will likely become 4c, 8c. your ROI is hence 100%-200%, if not more. but question: is it truly due to value, or isn't it more likely due to sentiment? lemme give examples of good and bad pennies: achieva, stamfordland, rowlsey, banjoo, jade. look at their jan 06 prices, and now, even with this fall. isn't it true that everything went up? 'value' or non-value stock. and then, it becomes a simple case of mathematics. You pick 10 pennies. say 3 of them go down, you buy in more to average up, since that's a WB principle of 'accumulation'. so your cost px is cheaper. The winners, you keep, and sell. the losers, because you kept averaging down, got cheaper. there is always a bull period when everything goes up. that is when you sell them. over time, you can only gain, since at any point in time, any stock will go up, if you are willing to wait the years. so question: is there truly such a thing as value, or isn't it simply the mathematics of probability? so to be a buffett, you don't need to learn to read annual reports, and pick 'value' stocks. for that amount of research done, you can likely random pick any 10 pennies, and the ones that go down, you put in more money, just keep putting in more; the ones that go up, you sell. sooner or later, your portfolio will be overall profit. since sooner or later, there will always be a bull run in which everything goes up. sorry for being so cynical. but i think, in the markets, it is good to learn, but it is also good to keep one's own mind independent and not mindlessly worship the style of others. |
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nickyng
Supreme |
20-Aug-2007 16:17
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ya lah...i also know...but after so much talk..can u tell it is beginning of BEAR now or end of BULL ?? u forget that 95% of us here are normal JOEs...dont hv spare capacity or deep pockets to make it RICH....RICH will forever get richer....they buy now...stock dip...they buy more...stock dip further they scoop more ! while for average JOEs...one mistake or if they are impatient they only have one chance...lan lan hv to hold for paper loss or cut loss? trying to salvage some $$ still hv to eat and buy clothing to wear u know? cant HOLD too long like RICHies RICH!!!... so how does that tally with your story ??? more for bedtime children story telling right???? nah....rich get richer...poor get poorer...that rule stay...regardless... |
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KiLrOy
Master |
20-Aug-2007 16:07
Yells: "I buy only what I can see." |
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Last hour of trading in a rebound market. Enjoy the read. ! Taking advantage of volatility in the marketThe stock market is controlled by people and, as a result, emotions. The two most prominent of these are fear and greed. Under their sway, the market makes very little sense in the short term. On the slightest news of a sales decline or the first glimmer of hope in a clinical trial for a new drug, a company's stock can plummet or skyrocket far beyond the ranges of reason and logic. The good news is, this volatility can make you very, very rich.
A stock market correction may be based on emotion, not logicPresume there is a bookstore in New York City that you wish to purchase. The store sells $300,000 worth of books annually and is quite profitable. This particular bookstore is painted a light shade of blue. Each morning, the investment banker representing the current owners comes to your office and offers to sell you the property for what he believes it is worth on that particular day.On Monday, he comes and offers to sell you the business for $500,000. You refuse; overpaying for a business, even an excellent one, is always folly. On Tuesday, he stops by and offers the store to you for $800,000 because he believe bookstores that are painted blue are on the rise. Once again, you send him on his way.
On Wednesday, however, the banker arrives at your office in a panic. Apparently, a number of students at a local high school began to burn books en masse and he is gravely concerned the bookstore business will soon have no value. As a result, he offers to sell you the business for $50,000. Realizing that it is completely illogical to assume a book burning is going to have any effect whatsoever on long-term profits, you readily accept the deal and buy the company for a fraction of its intrinsic value. "Well, I'd never get a deal that good!" you might say. You are presented with them every day! When a company's stock plummets, people often panic and sell. Unless the business is truly facing extinction or a drastic decrease in value, this is insane. If your favorite ice cream went on sale, would you wait until it had doubled in price before you bought it!? Why should your favorite stock be any different? Coca-Cola is certainly more attractive at $20 per share than it is at $50 per share, regardless of any short term difficulties that may arise. An investor should feel no shame in exploiting the folly of Mr Market. Stock market corrections are filled with opportunitiesTrue fortunes are made during times of economic distress or financial corrections. Only one year before he completed the formation of U.S. Steel (which financial historians have called the deal of the 20th century), J.P. Morgan said that such a feat could never be accomplished by any man - until the markets crashed. The depressed valuations of the companies involved allowed him to purchase the business entities at a fraction of what they had been selling for twelve months earlier.The next time the market is cut drastically to its knees, look around for the great, solid, blue chip companies that have weathered depressions countless times before. The odds are substantial they will be selling at discount prices, and when the market finally does recover (which it inevitably will), your portfolio will profit from the shrewd, logical investment decisions you made while the investing public was in a panic. The secret to wealth has always been to "buy when there's blood running in the street and sell when everyone is pounding at your door, clawing to own your equities." You must have enough faith in yourself to buy when the rest of the market is selling. Most people don't have the self-confidence and resolve to do so, and always end up following the crowd. Remember, just because you follow the majority of people, doesn't mean the majority of people aren't wrong. That's why 95% of investors aren't driving Mercedes and living in Key West three months out of the year. Base your decisions on analysis and value and you will, more often than not, come out ahead. |
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