Greenrookie – What prompted me to respond to your posting is your remark “to keep learning and be humble”. I have been adopting this same approach for some time and have learned much in my own investment journey. There is a lot of truth in the sayings –
“LEARNING IS A LIFE LONG PROCESS” and
“PRIDE COMES BEFORE A FALL; HUMILITY COMES BEFORE WISDOM” – sounds deep in meaning?
I look back with sadness how many of my friends were just unable to make money from their stock investments over their whole working career. They were good academically qualified individuals but just lacking investment wisdom. They all had one thing in common – they kept asking themselves the same questions after every major setback, “Why I never learned from my past mistakes? What went wrong this time? [After the event] - I should (or shouldn’t) have sold/bought, why didn’t I do it?”
Like many people, I also learned stock investment the hard way. During the first 10 years, I always made money in the bull market but only to lose them all in a bear market. With better risk management over the next 20-year period, I managed to build up profits sufficient to get myself a condo unit (of that time). Unfortunately, I lose all my accumulated profits plus a portion of my capital, when the Asian financial crisis set in. For months I was confronted with the question – would I ever be able to recoup what I lose? Any hope of recovering the big losses certainly looked to be an impossible task. Like others, I had certain investment strength and weaknesses and I decided to focus on my strength and spend the next 2 years doing research and study into how I could perform considerably better in my investments. Finally, I arrived at the following conclusion:
1. KNOWLEDGE IS POWER – It is a great advantage for a stock investor to have a good understanding (at least the basics) of market behaviour (including bull & bear market cycles), market participants’ behaviour, technical analysis, fundamental analysis as well as psychological analysis. Develop one’s investment strength and strive to overcome one’s investment weaknesses.
2. A POSITIVE MINDSET – Always examine all the probable (not necessary workable) ways to capitalize on opportunities. A negative mindset always leads to a dead end. Hence, get rid of all biasness especially against certain stocks like S-chips. Our biggest enemy in the market is really ourselves and not the remisers, analysts, SGX, manipulators, S-chip management or Lethman Brothers, etc. We can only blame ourselves when we lose money since we all have complete freedom of choice to buy or sell any stock at any time – very democratic.
3. FAVOURITE STOCKS – All stocks are there for any astute person to use his wisdom to make money. A good practical advice is still – “NEVER FALL IN LOVE WITH A STOCK & LET IT BECOME YOUR RELATIVE. FOR PARTING CAN COST YOU MUCH MONEY WHEN YOUR LOVE IS NO LONGER LOVEY HONEY”.
4. GOOD RISK MANAGEMENT – Look for what can be considered as good growth stocks having low downside risks but high potential capital gains – invariably such stocks have low public interests & PEs. An example of this is KREUZ that I had also posted in Nextinsight Forum in Nov 2012 when its share price was around 40 cts.
5. ESTABLISH CORE HOLDINGS – This is the key to making big profits from stocks; especially important for one aiming to build a base or to make a million in the market; when fortune comes, it is like having 100 winning tickets in first prize 4-D, instead of holding just one or two tickets. As the risk with core holdings are higher because of the bigger stake, it is important to heed point 4 above.
With a new investment strategy using the principles described above, I was able to recoup twice the amount that I lose in the Asian financial crisis, during the bull market run from 2002 to 2007.
It is for each individual to formulate his or her own investment plan taking into account his/her own resources, knowledge and experience, and risk appetite. I hope some of the things I shared here could be helpful as to give you some useful ideas to formulate your own investment plan. If your present plan is not giving the results that you desire, then it is obvious that you would need to upgrade to a better one. May you have a profitable year ahead.