Some banks are already raising housing loan by about 35 basis points starting from June 2015. I believe banks are expecting US Federal Reserve will most likely to raise interest rate by 25 basis point around June 2015.
The volatility before & after interest rate hike should not be something investors are too worried about because that creates buying opportunities into equities.
Despite market obsession with share price appreciation, the truth is that investing for dividends is vital. Share price appreciation which is affected by non-fundamental factors such as sentiment, dividends represent actual cash that can only be paid out of earnings which are in turn driven by the economy.
Dividend return is therefore related to financial health and growth story of a company. Managers of companies have better information about their future prospects and loath cutting dividends, corporates often only pay high dividends today if they have reasonable comfort that their future earnings are strong enough to sustain the dividends.
Return gained from dividends received and re-invested enable us to compound our gains & growth our porfolios.
Dividends can only be paid out of real earnings and real cash flows, focusing on dividends helps investors avoid companies with "fake" earnings as these companies are unlikely to have the actual cash required to make dividend payments.
A company ability to growth its business and pay-out dividend is one of the inportant factor that drive up its share price.
1. We should have discipline to consistently invest based on fundamentals and valuations. In particular, it is important to have the ability to assess value and maintain price discipline in the face of market fluctuations and uncertainty.
2. We should have able to endure short-term pain for long-term gain in the face of market fluctuations and uncertainty.
3. We should have long-term mindset for it to work and let our winners run its cource rather than cashing out prematurely. Let our stocks increase it's recuring profit and generate yearly cash-flow.
4. We need patient, harvesting of long-term risk premiums, the countercyclical rebalancing of our portfolio, the ability to take advantage of short-term dislocations in financial markets.
5. Lastly very important is: Never keep or accumulate junk stocks in our portfolio as long term investment. Be prepare to cut lost or take profit on non performing stocks rather than average down only to further increase the loss. It makes no sense holding junk stocks for long term just because we're making a lost. In my opinion it is better to make some losses then seeing our stocks value loosing it's value day by day. This is the key to sucessful investment in growing our portfolio.
1. Warren Buffett advice on "Be fearful when others are greedy and be greedy when others are fearful." What does it really mean?
2. Warren Buffett once quipped: “The first rule of investing is don’t lose money. The second rule is never forget the first rule”. The question is how not to lose money?
Be Fearful When Others Are Greedy
When share market is getting to hot. When the bull run crazy. When most stocks suddenly comes alive. When everyone are excited about share market. When people buy up stocks without knowing the company business. When share price are chasing up sky high. When stock market is a place where every Tom, Dick and Harry can make money. When every stock people simply classified it as 'GEM'. That is the time to be fearful!
Be Greedy When Others Are Fearful
During market crisis or when share market collapse. Stocks are suddenly sold off like no tomorrow. During a crash when many stocks are selling at a huge discount. That is the time to be greedy. The question is:
How to have the emotional stability to buy stocks during a crisis?
First, you have to research the company you are going to buy. Behind every stock price is a company. How does the company generate profits? Where is it operating in? Is it a simple business? Is it a prominent business? Is it a strong brand? One useful strategy is to have, at the ready, a watch list of shares that we would like to own. These are companies that we have researched carefully and believe that they would not look out of place in our portfolios.
Secondly you have to assess whether the management is honest and competent.
Next wait for selling pressure to subside. Be very careful not to catch falling knives. Be very patient in cherry-pick fundamental sound stocks. You cannot buy at the absolute lowest but at least you can buy at a low price and at a deep discount.
Finally, the most important thing you have to know when is the right price to buy and also there's still room for growth in the company. This takes the emotions out during a crisis.
The First Rule Of Investing Is Don’t Lose Money
My view for this rule is not to speculate or gamble on stocks but to buy fundamental sound stocks at the right price. Speculation or gamble are zero-sum-game. Someone will win and someone will lost. Research the company you are going to buy. Behind every stock price is a company. How does the company generate profits? Where is it operating in? Is it a simple business? Is it a prominent business? Is it a strong brand? Don't worry about short term share price fluctuation but focus on more on company performance. Sell down holding gradually when over-price or business facing head-wind. Take profit or cut lost if necessary.
The above are just my understand on Warren Buffett advice.
Cheer & God Bless