Smart Money Investing - How to Profit from Stocks ?In this free online presentation, FTM Daily Editor-in-Chief Jerry Robinson teams up with Certified Financial Planner, Jay Peroni, to provide you with an up-to-date briefing on the U.S. stock market along with some our favorite investment opportunities right now. With central banks across the world keeping their printing presses hot and global tensions heightening every single day, Jay Peroni brings us his outlook on U.S. stocks and how you can protect and grow your investment portfolio during these volatile times.
In this 90 minute webinar, Jerry and Jay: - provides their latest investment insights on U.S. stocks. Give a general forecast of our favorite sectors and industry groups (including our favorite sectors for 2013) - http://ftmdaily.com/ " Do invest in stocks for longer term, Don't gamble in stock in short term . " |
|
Hi & Lo in FBM KLCI Stock Market (22 years history - Dec 1990 to Dec 2012 )
When stock prices are falling, the question on most investors' minds is "when will it stop?" In the midst of a roaring bull market, investors are eventually forced to wonder how long it can last. What causes markets to move? While there is no one answer, there are factors that are known to have a positive or negative impact on the equity markets, both on a daily basis and over time. Daily stock market movements are largely based on the laws of supply and demand. This means that stock prices will tend to appreciate in value as demand perks up and the supply of stocks for sale decreases. Conversely, if demand for a particular issue is low and the supply or volume of stocks for sale in the marketplace is high, prices will tend to decline. There are a number of factors that can impact equities trading, including supply and demand, interest rates, institutional investors and programs, market sentiment and psychology and effect of the commodity prices. Investors should be aware of these factors before getting into the market, and certainly monitor them after they've made an investment.
FOUR Ways To Predict Market Performance
There are two prices that are critical for any investor to know: the current price of the investment he or she owns, or plans to own, and its future selling price. Despite this, investors are constantly reviewing past pricing history and using it to influence their future investment decisions. Some investors won't buy a stock or index that has risen too sharply, because they assume that it's due for a correction, while other investors avoid a falling stock, because they fear that it will continue to deteriorate.
1. Momentum - "Don't fight the tape." This widely quoted piece of stock market wisdom warns investors not to get in the way of market trends. The assumption is that the best bet about market movements is that they will continue in the same direction. This concept has is roots in behavioral finance. With so many stocks to choose from, why would investors keep their money in a stock that's falling, as opposed to one that's climbing? It's classic fear and greed.
2. Mean Reversion - Experienced investors who have seen many market ups and downs, often take the view that the market will even out, over time. Historically high market prices often discourage these investors from investing, while historically low prices may represent an opportunity. The tendency of a variable, such as a stock price, to converge on an average value over time is called mean reversion.
3. Martingale - A martingale is a mathematical series in which the best prediction for the next number is the current number. The concept is used in probability theory, to estimate the results of random motion. For example, suppose that you have $50 and bet it all on a coin toss. How much money will you have after the toss? You may have $100 or you may have $0 after the toss, but statistically the best prediction is $50; your original starting position. The prediction of your fortunes after the toss is a martingale.
4. The Search for Value - Value investors purchase stock cheaply and expect to be rewarded later. Their hope is that an inefficient market has underpriced the stock, but that the price will adjust over time. The question is does this happen and why would an inefficient market make this adjustment?
The way to Building Wealth over many years is to nimble bit by bit to spread out your average costs and risks in valued stock portfolios. Over a period of time you would have planted many valued MONEY TREES in several type of businesses of reputable listed companies with a lot of assets at much average lower prices. As you noticed that the above the Bursa Malaysia, (KLSE) stock market will always the swing of HI (Bull) and LO (Bear) periods over past 22 years history from Dec 1990 to Dec 2012 , this is due to many reasons stated below:-
1.) the Bullish market trends in 1995-1996 above 1,200 points; (Bull )
2.) the Asian Financial crisis in 1997 to capital control in 1998 saw FBM KLCI plunged to 300 points; (Bear)
3.) the Global technology rally in 1999/2000 where FBM KLCI rebounded to 1,000 points; (Bull)
4.) the correction of Technology bubble in 2000 and the Asian SARs crisis in 2003 dragged down to 600 to 800 points; (Bear)
5.) the FBM KLCI rebounded strongly since 2004 onwards to hit the highest level at 1,524 points; (Bull)
6.) the Global stock markets sell-down on Sept 2008 caused the panic in FBM KLCI felt from 1,500 to 850 points; (Bear)
7.) the FMB KLCI broke 1,000 points again amidst high global market surge in May 2009; (Bull)
8.) the Global markets retreated on concerns over the European sovereign debt crisis in May 2010; (Bear)
9.) the FBM KLCI rebounded on the back of firmer regional markets to hit 1,600 points; (Bull)
10.) the FBM KLCI hits a intraday high at 1,689 points on 31 Dec 2012 (Bull)
Based on the historical stock market trend saw the FBM KLCI rallied 10 times in 22 years, these financial assets are real active money working very hard for you with huge arbitrage of Capital Gains and Dividends for your Passive Income !! Remember, only the VALUED SUCCESSFULL INVESTORS have the luxury of passive income i.e., money at work towards your Financial Freedom! As for others, it is always man at work! If a person doesn’t make it rich in life, then a person is forever poor! You have CHOICES in life! So I think investing and building wealth in stock market over time in long term is the best ways to building a solid RETIREMENT WEALTH for passive income. If you have substantial valued stocks portfolios accumulated overtime, then you can NEVER be poor again.
Below are the quotes and tips for your understanding as a "Long Term Investor in Valued Investing."
Quotes from Warren Buffett:
1. When you own stock in a great biz, keep it. If someone wants to sell you more at a bargain price, buy it.
2. Once you get into the right biz, you can let everyone else worry about the stock market.
3. Investors were buying stocks based on the action of the stock rather than on the quality of the biz that the stock represented.
4. Don’t dwell on the price of stocks, but study the underlying business. Buy biz, not stocks.
5. It was a volatile stock market but not a volatile business.
6. Investing is never emotional, always business like. Keep your head at all times; recognizing that acting on emotion can kill a stock market portfolio.
7. Don’t think about “stock in the short term.” Think about “biz in the long term.”
8. Seize opportunities created by stock market folly.
9. Avoid diversification, instead investing in a few enduring companies with predictable biz model.
10. Embrace bear market, taking advantage of the opportunity they provide to buy when everyone is selling.
11. A Fool will sell the winning stock. The Wise investor sell the losing stock and keep the Winner!
10 Tips For The Successful Long-Term Investor
While it may be true that in the stock market there is no rule without an exception, there are some principles that are tough to dispute. Let's review 10 general principles to help investors get a better grasp of how to approach the market from a long-term view. Every point embodies some fundamental concept every investor should know.
1. Sell the losers and let the winners ride! - Time and time again, investors take profits by selling their appreciated investments, but they hold onto stocks that have declined in the hope of a rebound. If an investor doesn't know when it's time to let go of hopeless stocks, he or she can, in the worst-case scenario, see the stock sink to the point where it is almost worthless. Of course, the idea of holding onto high-quality investments while selling the poor ones is great in theory, but hard to put into practice.
2.Don't chase a "hot tip" - Whether the tip comes from your brother, your cousin, your neighbor or even your broker, you shouldn't accept it as law.
When you make an investment, it's important you know the reasons for doing so; do your own research and analysis of any company before you even consider investing your hard-earned money. Relying on a tidbit of information from someone else is not only an attempt at taking the easy way out, it's also a type of gambling. Sure, with some luck, tips sometimes pan out. But they will never make you an informed investor, which is what you need to be to be successful in the long run.
3.Don't sweat the small stuff - As a long-term investor, you shouldn't panic when your investments experience short-term movements. When tracking the activities of your investments, you should look at the big picture. Remember to be confident in the quality of your investments rather than nervous about the inevitable volatility of the short term. Also, don't overemphasize the few cents difference you might save from using a limit versus market order. Granted, active traders will use these day-to-day and even minute-to-minute fluctuations as a way to make gains. But the gains of a long-term investor come from a completely different market movement - the one that occurs over many years - so keep your focus on developing your overall investment philosophy by educating yourself.
4. Don't overemphasize the P/E ratio - Investors often place too much importance on the price-earnings ratio (P/E ratio). Because it is one key tool among many, using only this ratio to make buy or sell decisions is dangerous and ill-advised. The P/E ratio must be interpreted within a context, and it should be used in conjunction with other analytical processes. So, a low P/E ratio doesn't necessarily mean a security is undervalued, nor does a high P/E ratio necessarily mean a company is overvalued. Therefore, it always prudent to calculate the intrinsic value of the stock pick.
5. Resist the lure of penny stocks - A common misconception is that there is less to lose in buying a low-priced stock. But whether you buy a $5 stock that plunges to $0 or a $75 stock that does the same, either way you've lost 100% of your initial investment. A lousy $5 company has just as much downside risk as a lousy $75 company. In fact, a penny stock is probably riskier than a company with a higher share price, which would have more regulations placed on it.
6. Pick a strategy and stick with it - Different people use different methods to pick stocks and fulfill investing goals. There are many ways to be successful and no one strategy is inherently better than any other. However, once you find your style, stick with it. An investor who flounders between different stock-picking strategies will probably experience the worst, rather than the best, of each. Constantly switching strategies effectively makes you a market timer, and this is definitely territory most investors should avoid. Take Warren Buffett's actions during the dotcom boom of the late '90s as an example. Buffett's value-oriented strategy had worked for him for decades, and - despite criticism from the media - it prevented him from getting sucked into tech startups that had no earnings and eventually crashed
7. Focus on the future - The tough part about investing is that we are trying to make informed decisions based on things that are yet to happen.
It's important to keep in mind that even though we use past data as an indication of things to come, it's what happens in the future that matters most.
A quote from Peter Lynch's book "One Up on Wall Street" (1990) about his experience with Subaru demonstrates this: "If I'd bothered to ask
myself, 'How can this stock go any higher?' I would have never bought Subaru after it already went up twentyfold. But I checked the fundamentals, realized that Subaru was still cheap, bought the stock, and made sevenfold after that." The point is to base a decision on future potential rather than on what has already happened in the past.
8. Adopt a long-term perspective - Large short-term profits can often entice those who are new to the market. But adopting a long-term horizon and dismissing the "get in, get out and make a killing" mentality is a must for any investor. This doesn't mean that it's impossible to make money by actively trading in the short term. But, as we already mentioned, investing and trading are very different ways of making gains from the market. Trading involves very different risks that buy-and-hold investors don't experience. As such, active trading requires certain specialized skills.
9. Be open-minded - Many great companies are household names, but many good investments are not household names. Thousands of smaller companies have the potential to turn into the large blue chips of tomorrow. In fact, historically, small-caps have had greater returns than large-caps; over the decades from 1926-2001, small-cap stocks in the U.S. returned an average of 12.27% while the Standard & Poor's 500 Index (S&P 500) returned 10.53%. This is not to suggest that you should devote your entire portfolio to small-cap stocks. Rather, understand that there are many great companies beyond those in the Dow Jones Industrial Average (DJIA), and that by neglecting all these lesser-known companies, you could also be neglecting some of the biggest gains.
10. Be concerned about taxes, but don't worry - Putting taxes above all else is a dangerous strategy, as it can often cause investors to make poor, misguided decisions. Yes, tax implications are important, but they are a secondary concern. The primary goals in investing are to grow and secure your money. You should always attempt to minimize the amount of tax you pay and maximize your after-tax return, but the situations are rare where you'll want to put tax considerations above all else when making an investment decision. In fact, it is tax free on capital gain in FBM KLCI and dividends earned are claimable in the tax return each year in Malaysia.
Conclusion - There are exceptions to every rule, but we hope that these solid tips for long-term investors and the common-sense principles we've discussed benefit you overall and provide some insight into how you should think about investing in the stock market. Find out more how to invest in the past cyclical stock market trend from 1978 to 2005 - Read more : The Ups And Downs Of Investing In Cyclical Stocks
FOUR Ways To Predict Market Performance
There are two prices that are critical for any investor to know: the current price of the investment he or she owns, or plans to own, and its future selling price. Despite this, investors are constantly reviewing past pricing history and using it to influence their future investment decisions. Some investors won't buy a stock or index that has risen too sharply, because they assume that it's due for a correction, while other investors avoid a falling stock, because they fear that it will continue to deteriorate.
1. Momentum - "Don't fight the tape." This widely quoted piece of stock market wisdom warns investors not to get in the way of market trends. The assumption is that the best bet about market movements is that they will continue in the same direction. This concept has is roots in behavioral finance. With so many stocks to choose from, why would investors keep their money in a stock that's falling, as opposed to one that's climbing? It's classic fear and greed.
2. Mean Reversion - Experienced investors who have seen many market ups and downs, often take the view that the market will even out, over time. Historically high market prices often discourage these investors from investing, while historically low prices may represent an opportunity. The tendency of a variable, such as a stock price, to converge on an average value over time is called mean reversion.
3. Martingale - A martingale is a mathematical series in which the best prediction for the next number is the current number. The concept is used in probability theory, to estimate the results of random motion. For example, suppose that you have $50 and bet it all on a coin toss. How much money will you have after the toss? You may have $100 or you may have $0 after the toss, but statistically the best prediction is $50; your original starting position. The prediction of your fortunes after the toss is a martingale.
4. The Search for Value - Value investors purchase stock cheaply and expect to be rewarded later. Their hope is that an inefficient market has underpriced the stock, but that the price will adjust over time. The question is does this happen and why would an inefficient market make this adjustment?
The way to Building Wealth over many years is to nimble bit by bit to spread out your average costs and risks in valued stock portfolios. Over a period of time you would have planted many valued MONEY TREES in several type of businesses of reputable listed companies with a lot of assets at much average lower prices. As you noticed that the above the Bursa Malaysia, (KLSE) stock market will always the swing of HI (Bull) and LO (Bear) periods over past 22 years history from Dec 1990 to Dec 2012 , this is due to many reasons stated below:-
1.) the Bullish market trends in 1995-1996 above 1,200 points; (Bull )
2.) the Asian Financial crisis in 1997 to capital control in 1998 saw FBM KLCI plunged to 300 points; (Bear)
3.) the Global technology rally in 1999/2000 where FBM KLCI rebounded to 1,000 points; (Bull)
4.) the correction of Technology bubble in 2000 and the Asian SARs crisis in 2003 dragged down to 600 to 800 points; (Bear)
5.) the FBM KLCI rebounded strongly since 2004 onwards to hit the highest level at 1,524 points; (Bull)
6.) the Global stock markets sell-down on Sept 2008 caused the panic in FBM KLCI felt from 1,500 to 850 points; (Bear)
7.) the FMB KLCI broke 1,000 points again amidst high global market surge in May 2009; (Bull)
8.) the Global markets retreated on concerns over the European sovereign debt crisis in May 2010; (Bear)
9.) the FBM KLCI rebounded on the back of firmer regional markets to hit 1,600 points; (Bull)
10.) the FBM KLCI hits a intraday high at 1,689 points on 31 Dec 2012 (Bull)
Based on the historical stock market trend saw the FBM KLCI rallied 10 times in 22 years, these financial assets are real active money working very hard for you with huge arbitrage of Capital Gains and Dividends for your Passive Income !! Remember, only the VALUED SUCCESSFULL INVESTORS have the luxury of passive income i.e., money at work towards your Financial Freedom! As for others, it is always man at work! If a person doesn’t make it rich in life, then a person is forever poor! You have CHOICES in life! So I think investing and building wealth in stock market over time in long term is the best ways to building a solid RETIREMENT WEALTH for passive income. If you have substantial valued stocks portfolios accumulated overtime, then you can NEVER be poor again.
Below are the quotes and tips for your understanding as a "Long Term Investor in Valued Investing."
Quotes from Warren Buffett:
1. When you own stock in a great biz, keep it. If someone wants to sell you more at a bargain price, buy it.
2. Once you get into the right biz, you can let everyone else worry about the stock market.
3. Investors were buying stocks based on the action of the stock rather than on the quality of the biz that the stock represented.
4. Don’t dwell on the price of stocks, but study the underlying business. Buy biz, not stocks.
5. It was a volatile stock market but not a volatile business.
6. Investing is never emotional, always business like. Keep your head at all times; recognizing that acting on emotion can kill a stock market portfolio.
7. Don’t think about “stock in the short term.” Think about “biz in the long term.”
8. Seize opportunities created by stock market folly.
9. Avoid diversification, instead investing in a few enduring companies with predictable biz model.
10. Embrace bear market, taking advantage of the opportunity they provide to buy when everyone is selling.
11. A Fool will sell the winning stock. The Wise investor sell the losing stock and keep the Winner!
10 Tips For The Successful Long-Term Investor
While it may be true that in the stock market there is no rule without an exception, there are some principles that are tough to dispute. Let's review 10 general principles to help investors get a better grasp of how to approach the market from a long-term view. Every point embodies some fundamental concept every investor should know.
1. Sell the losers and let the winners ride! - Time and time again, investors take profits by selling their appreciated investments, but they hold onto stocks that have declined in the hope of a rebound. If an investor doesn't know when it's time to let go of hopeless stocks, he or she can, in the worst-case scenario, see the stock sink to the point where it is almost worthless. Of course, the idea of holding onto high-quality investments while selling the poor ones is great in theory, but hard to put into practice.
2.Don't chase a "hot tip" - Whether the tip comes from your brother, your cousin, your neighbor or even your broker, you shouldn't accept it as law.
When you make an investment, it's important you know the reasons for doing so; do your own research and analysis of any company before you even consider investing your hard-earned money. Relying on a tidbit of information from someone else is not only an attempt at taking the easy way out, it's also a type of gambling. Sure, with some luck, tips sometimes pan out. But they will never make you an informed investor, which is what you need to be to be successful in the long run.
3.Don't sweat the small stuff - As a long-term investor, you shouldn't panic when your investments experience short-term movements. When tracking the activities of your investments, you should look at the big picture. Remember to be confident in the quality of your investments rather than nervous about the inevitable volatility of the short term. Also, don't overemphasize the few cents difference you might save from using a limit versus market order. Granted, active traders will use these day-to-day and even minute-to-minute fluctuations as a way to make gains. But the gains of a long-term investor come from a completely different market movement - the one that occurs over many years - so keep your focus on developing your overall investment philosophy by educating yourself.
4. Don't overemphasize the P/E ratio - Investors often place too much importance on the price-earnings ratio (P/E ratio). Because it is one key tool among many, using only this ratio to make buy or sell decisions is dangerous and ill-advised. The P/E ratio must be interpreted within a context, and it should be used in conjunction with other analytical processes. So, a low P/E ratio doesn't necessarily mean a security is undervalued, nor does a high P/E ratio necessarily mean a company is overvalued. Therefore, it always prudent to calculate the intrinsic value of the stock pick.
5. Resist the lure of penny stocks - A common misconception is that there is less to lose in buying a low-priced stock. But whether you buy a $5 stock that plunges to $0 or a $75 stock that does the same, either way you've lost 100% of your initial investment. A lousy $5 company has just as much downside risk as a lousy $75 company. In fact, a penny stock is probably riskier than a company with a higher share price, which would have more regulations placed on it.
6. Pick a strategy and stick with it - Different people use different methods to pick stocks and fulfill investing goals. There are many ways to be successful and no one strategy is inherently better than any other. However, once you find your style, stick with it. An investor who flounders between different stock-picking strategies will probably experience the worst, rather than the best, of each. Constantly switching strategies effectively makes you a market timer, and this is definitely territory most investors should avoid. Take Warren Buffett's actions during the dotcom boom of the late '90s as an example. Buffett's value-oriented strategy had worked for him for decades, and - despite criticism from the media - it prevented him from getting sucked into tech startups that had no earnings and eventually crashed
7. Focus on the future - The tough part about investing is that we are trying to make informed decisions based on things that are yet to happen.
It's important to keep in mind that even though we use past data as an indication of things to come, it's what happens in the future that matters most.
A quote from Peter Lynch's book "One Up on Wall Street" (1990) about his experience with Subaru demonstrates this: "If I'd bothered to ask
myself, 'How can this stock go any higher?' I would have never bought Subaru after it already went up twentyfold. But I checked the fundamentals, realized that Subaru was still cheap, bought the stock, and made sevenfold after that." The point is to base a decision on future potential rather than on what has already happened in the past.
8. Adopt a long-term perspective - Large short-term profits can often entice those who are new to the market. But adopting a long-term horizon and dismissing the "get in, get out and make a killing" mentality is a must for any investor. This doesn't mean that it's impossible to make money by actively trading in the short term. But, as we already mentioned, investing and trading are very different ways of making gains from the market. Trading involves very different risks that buy-and-hold investors don't experience. As such, active trading requires certain specialized skills.
9. Be open-minded - Many great companies are household names, but many good investments are not household names. Thousands of smaller companies have the potential to turn into the large blue chips of tomorrow. In fact, historically, small-caps have had greater returns than large-caps; over the decades from 1926-2001, small-cap stocks in the U.S. returned an average of 12.27% while the Standard & Poor's 500 Index (S&P 500) returned 10.53%. This is not to suggest that you should devote your entire portfolio to small-cap stocks. Rather, understand that there are many great companies beyond those in the Dow Jones Industrial Average (DJIA), and that by neglecting all these lesser-known companies, you could also be neglecting some of the biggest gains.
10. Be concerned about taxes, but don't worry - Putting taxes above all else is a dangerous strategy, as it can often cause investors to make poor, misguided decisions. Yes, tax implications are important, but they are a secondary concern. The primary goals in investing are to grow and secure your money. You should always attempt to minimize the amount of tax you pay and maximize your after-tax return, but the situations are rare where you'll want to put tax considerations above all else when making an investment decision. In fact, it is tax free on capital gain in FBM KLCI and dividends earned are claimable in the tax return each year in Malaysia.
Conclusion - There are exceptions to every rule, but we hope that these solid tips for long-term investors and the common-sense principles we've discussed benefit you overall and provide some insight into how you should think about investing in the stock market. Find out more how to invest in the past cyclical stock market trend from 1978 to 2005 - Read more : The Ups And Downs Of Investing In Cyclical Stocks