Sunday, June 24, 2007

investment mistake

Its been an interesting and stressful week. An investment scheme of my friend finally went bust. Ive always warned my friends of the danger of these kinds of investment. The investment will almost double your money in one month. I really dont know if it was a ponzi scheme, hyip or a scam because for a long time it was really paying well. The good thing for me was that i really believed that “it was too good to be true” so every time that interest was being paid on the principal i kept on reducing the principal before the investment went bust. At least i can live with my decision for i have almost recovered my investment. :) this investment is a lesson for me and taught me a lot about the psychology in investing the excitement and the ensuing panic when everything falls apart. Every time interest is due i kept on getting it while some of my friends kept on adding to their investment and i have the impression that some of them have put more than half of their savings in it for they believe that it is a “once in a lifetime opportunity.” so what will they do now because i believe that there is just a very slim chance that they can recover the whole of their investment. It also showed me that the generation nowadays dont value hard work. They would rather have it easy. But lets not deny it who wouldnt want to earn easy money but not to the point of putting almost all of your money in it. This is something that i would also like to do more research on the saying “easy come easy go”. Or what are the percentages that one can save from hard earned money and easy money. I noticed that the generation of my parents and grandparents give much more value to hard work maybe this is because they experienced hardships during the war? I really dont have the correct explanation for that phenomenon. Im lucky for my family has instilled in me the value of hard work and i am not afraid to get my hands dirty. :) and everybody shouldnt be afraid to do hard work for i remember there was one taipan that said “there is no shortcut to success and hard work is the key to success.” and i remember i think it was lucio tan who said this during an interview “i became successful because when i knew that my competitors were working 8hours a day i put in 10hours a day and when i found out that they were working 10hours a day i put in 12hours a day.” now you know why he is one of the richest people in the country. :) i remember my dad also in a meeting before when he got upset with a manager and up to now i can still clearly remember his words “i dont care how smart you are, but i come from the old school and the only thing that i know is hard work.” :) here is another story of another taipan told to me by a friend when henry sy saw the movie “ghost” starring patrick swayze and demi moore he made it a point to let everybody in his family watch the movie to watch a particular scene. It was the scene where another ghost was teaching patrick swayze how to move objects, the latter was being told by the other ghost to concetrate and focus until he finally moved the object. The moral of the story is focus. For hardwork without focus is nothing. Good luck on all your trades and God bless. :)

Sunday, June 17, 2007

shanghai market

Wow! What a way to end the week! With this i believe that we can expect an exciting and bullish next few weeks. :) and who knows maybe the 3,800 mark can be reached before the end of the 1st of half of the year. :) but anything can happen in the market so lets just wait and see. :) ive read some of my past posts and i think i should apologize for some of the typographical errors and maybe some of the topics that i wrote might have bored you. But i should also thank some of the faithful followers of my blog and to some who have posted comments, sent private messages and e-mails. :) thank you very much it is very encouraging and believe me i will always strive to learn more about the market and share it here with everybody. :) before i start discussing my topic for this week i would also like to mention the solid group inc.(SGI) has finally broken out and im really happy about it. I remember when i wrote about it some time late october last year a lot of people really reacted to it. But the reactions were really more on the negative than on the positive but anyway everybody is entitled to their opinion. I have stated my opinion and it might be right or wrong but the best judge would be time. :) “when holding a good stock time is your best friend, when holding a bad stock time is your worst enemy.” You could read about sgi in my blog, i wrote about it october 25, 2006.

i would like to explain the shanghai mini selldown and try to explain to you guys on why it happened and the reasons behind it. I talked to a private banker and she told me that the shanghai stock market is mostly held by retail investors or weak hands as they say. Why do they say that retail investors are weak hands? Because the majority of the people here are the ones who dont understand the stock market fully well. Most of the people here trade on tips and trade based on recommendations by other people without even researching or understanding the company that their buying into. So if the market drops a bit you can expect a panic because they dont fully understand the stocks that they own. :) another factor in the cause of the drop in the shanghai stock market is that the rise is meteoric and too fast and sooner or later the market will find its equilibrium. Another thing that could explain the fall of the market is that there are not that many funds invested in their market. That being the case, it is a house built of sticks and the big bad wolf could blow it away anytime it wants too but a house that is built of bricks would take so much more to bring it down. :) the fundies are the backbone to any stock market and when present in a market is a sure sign of good things to come for it. :) the mutuals funds are the ones that are considered the strong hand. their market will also be affected if their government will approve that the locals can invest money overseas. With all of these things mentioned, i believe that the shanghai stock market is due for a big correction but i really couldnt tell when exactly this will happen but i know for a fact that it is due for one. What does this mean for us? Well it could really mean a lot of things but there are really a lot of factors that you have to consider but for me the real issue at hand is the philippine stock market itself. How is it doing? It is doing great now up 23% year to date and with its close last week it will mostly likely go higher and who knows maybe 3,800 very soon. :) the philippine market is fairly valued as of the moment and if ever there is a correction i believe that it wouldnt go down as much. But for the meantime let us all enjoy this bull market of ours. :) words of warren buffett about buy and hold. “i made a lot of money doing nothing.” good luck on all your trades and God bless. :)

Sunday, June 03, 2007

mindset for investing

The topic that im going to talk about this week was inspired by two friends elizabeth and raffy boy when i had a talk with them on two separate occasions and “the art of war” by sun tzu. i could say that it was very timely with how our market has been like lately. :) anyway i will try to discuss this in the simplest way possible. Here is the line that really struck me in the book: “know your enemy, know yourself, and your victory will not be threatened. Know the terrain, know the weather and your victory will be complete.”

Know your enemy and what does this mean to the market? Your enemy in investing would be the more than 200 companies in the philippine stock market. And why do i consider them as enemies? Like in war you try to conquer your enemy to gain more power but in investing you need to “conquer” companies being traded in our market. Just like in war you study your opponent and look at its weak points and strong points and from there you make your approach on how to defeat your opponent. In investing you study the different companies and see what is the best price to buy the stock. Study the different companies and find out what are its good points and bad points. When you know your stocks well you would know that it will do even better in the long run. As ive said before you should buy the stock when everything is in your favor. Quoting warren buffett, “when holding a bad stock time is your enemy and when holding a great stock time is your friend.” For a great company will almost always increase shareholder value in the long run. :)

knowing yourself will help you a lot in investing. What are you good at and what are your weaknesses? When you know your strengths you can use it to your advantage and then find ways to cover up the weaknesses. :) this is what i figured with my friend raffy boy who has been asking me since last week if ive sold my holdings in the market and i told him that im still in the market and i havent sold anything yet. He just told me the other day that he has sold all his holdings in the market except for two because he got scared because the market dropped more than 1% and the market might have reached its peaked already. And then the next day the market goes up 2% and the next day another 2% and just this afternoon he texted me that he made a bad call in selling his stock holdings. What i see that is wrong here is his refusal to recognize that he needs help on how to read charts, on how to study companies and on judging the trend of the market. He would rather make decisions to buy or sell stocks based on his “feel” on the market. If he recognized his weakness he couldve avoided the mistake of selling. :) and listening to him he gives me the impression that he wants to be a long term investor but buys and sells stocks like a trader. In other words he also doesnt know what he wants from the market. knowing yourself it would make investing easier, for you would know which style of investing would suit you be it short, medium or long term and when you know this it would make investing more “comfortable” for you. :) do you think a sprinter would do well if he joined a marathon? :)

know the terrain means understanding where you are doing battle and that is philippine stock market itself. Understand the stocks being traded and the nature of securities. By nature, equities fluctuate in the short term but in the long run it usually follows a certain trend. :) if you recognize this it would make you a better investor and not make hasty decisions. Again i'll mention what i said awhile ago with what happened to my friend raffy boy if only he recognized the nature of stocks he wouldnt have panicked when the market went down 2%. :) are you risk averse or risk tolerant? To be a good long term investor, one has to have the stomach to see the market drop 10% in a day and be okay with it. If youre not comfortable with that then you should use a different style in trading. as the great investor warren bufett said “the ticker is just there to see if there is something foolish being offered in the market.” :)

know the weather means being able to analyze how the market will respond to everything thats happening around us. Be it increase in interest rates, a higher or lower inflation, a higher gdp and so on. But there are so many things that are happening so how do you know which one to watch? Personally i believe that it is better to analyze the company than the economy. Why? Because i cant think of anybody who can control the economy and there are so many factors to consider that one way or another you would make a mistake but one could correctly analyze a company. And from there you could make a conclusion at what price to buy the stock. :) when you know the company that you own, you wouldnt panic if it drops in price because you know its real value. :) you might even want to get yourself more shares. :) you dont have to buy the stock when it is trading at 30 times its price-earnings ratio but you could buy it when it is trading at 10 times its pe ratio. Its all about being patient. :) and i remembered when i had a talk with my friend elizabeth about being passionate in everything that you do. Well i believe that in everything that you do, your heart and soul should be in it. If that is not the case then why do it? :) a long term investor or any trader for that matter should be passionate but detached. You might want the stock of a certain company but when the time comes that it is trading at such a high premium you have to be able to unload it. Such is the nature of investing. :) invest to get something in return. :) but dont be too passionate because you might also run out of steam and for long term investors i discourage tracking the market for it is the nature of stocks to fluctuate and as such it might make you uneasy or panic then cause you to commit mistakes. Again the attitude one should take is passionate but detached. :)

the market ended this week gaining over 2% on thursday and friday. :) and again the market has made a new high. I think that the market will make a strong move again the next few weeks but of course anything can happen because the market is irrational. :) as ive mentioned last week the market has now set 3,800 as its minimum upside :) lets wait and see what happens. :) in a bull market it is in the sitting that you make money. :) but for now enjoy the ride! :) good luck on your trades and god bless. :)