Don't go chasing stock tips

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#1
Is it really difficult to invest properly? Huh

The Straits Times
Apr 22, 2012
SMALL CHANGE
Don't go chasing stock tips

To make money, learn the traits of successful investors instead

By Goh Eng Yeow

At the inaugural Sunday Times Invest Seminar held recently, speaker Lim Say Boon, chief investment officer of DBS Private Bank, remarked on how difficult it was to make money in the current uncertain market environment.

'If it were so easy to make money, I would not be here working on a Saturday,' he told the 600-strong audience on April 14.

It is a view shared by many in the audience - risk-averse investors like myself, who would like to enjoy a better return than the paltry 0.05 per cent interest we get on our POSB accounts, but are unwilling to put our hard-earned nest eggs at risk.

I mingled with the crowd after the seminar, and the recurring theme was an almost obsessive search for safe-haven assets. I was also flattered that some of the participants were keen to find out what I had invested in. 'Will you be buying the new Genting perpetual securities?' one of them asked.

Sure, I have covered the financial sector for almost 25 years, but even I have had my fair share of hits and misses among my investments.

But one piece of advice I want to offer is that, rather than focusing on specific stock tips, people should consider the traits of a successful investor.

One of the perks of being a markets writer that I have enjoyed is the opportunity to meet a number of investing geniuses over the years.

One thing that struck me is how ordinary they were. None of them seemed exceptionally clever, like the brilliant physicists and mathematicians I met at Cambridge University during my undergraduate days. Some of the investors did not seem to be very competitive, or even driven by the desire to make money.

Perhaps it was their other interests that turned them into such great investors, as they did not get distracted by the roller-coaster that hits the market from time to time. In fact, many of them did not even bother to track the market on a daily basis.

But they shared a common trait: All of them seemed to be at peace with themselves and the world, enjoying happy marriages and blissful family lives.

As investors, they also knew their limits. They would not be chasing after shares whose prices had already risen during a super bull run.

But when the blood was out on the street and the world seemed to be on the verge of collapsing, as it did in September 2008 when US investment bank Lehman Brothers failed, they would be out there, making big wagers on the market.

One other important trait they possessed was the ability not to miss the wood for the trees. Good investors go about life with their eyes open.

While others were chasing the latest hot stock tip tossed out by their brokers and analysts, they would be observing consumer habits and making careful notes of any trend that might be evolving.

And rather than taking analyst reports at face value, they would test the assumptions made in the reports with their first-hand experience.

There is another thing that I have noticed about good investors: Most of them do not invest in stocks or financial instruments about which they do not possess a good understanding.

The best example is legendary investment guru Warren Buffett, whose former daughter-in-law, Ms Mary Buffett, has just come out with another best-seller, The Warren Buffett Stock Portfolio, which examines the 17 stocks that helped him to achieve his extraordinary wealth.

Mr Buffett's stock portfolio, she noted, is filled with counters with a 'durable competitive advantage' and 'predictability of earnings'.

Take Wrigley's chewing gum, one of Mr Buffett's core stock holdings. Even with the advent of the Internet, which has revolutionised the way people interact with one another, people will still chew gum.

The same investing principle applies to US retail giant Walmart Stores, another of Mr Buffett's core stock holdings.

This is a company where an investor can get a pulse of the business simply by strolling into the many department stores it operates. For us, the local corollary would be grocery giant Dairy Farm and supermarket operator Sheng Siong Group.

The key, of course, is to identify such businesses and make sure that you have the cash ready to buy into their shares when they are unfairly sold down during stock market turmoil, which now occurs with distressing regularity.

It is a simple rule often articulated by Mr Buffett: Be fearful when others are greedy and greedy when others are fearful.

engyeow@sph.com.sg
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
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#2
We do have an advantage over banks/hedge funds..etc..

We don't have to trade for a living...time is always on our side...

Smile
1) Try NOT to LOSE money!
2) Do NOT SELL in BEAR, BUY-BUY-BUY! invest in managements/companies that does the same!
3) CASH in hand is KING in BEAR! 
4) In BULL, SELL-SELL-SELL! 
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#3
Quote:But they shared a common trait: All of them seemed to be at peace with themselves and the world, enjoying happy marriages and blissful family lives.

After watching Kung-Fu Panda 2, I strongly suspected that was the mental state I had to achieve ie. Inner Peace... Tongue
Luck & Fortune Favours those who are Prepared & Decisive when Opportunity Knocks
------------ 知己知彼 ,百战不殆 ;不知彼 ,不知己 ,每战必殆 ------------
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#4
(22-04-2012, 11:51 AM)brattzz Wrote: We don't have to trade for a living...time is always on our side...

I think this is possibly one of the biggest advantage we have.

Active Manager
Trade too much, returns get eroded by comms.
Trade too little, client might as well invest in passive fund/ETF.

Pressure to perform is always there.
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#5
Good insights in the article! Thanks for re-posting MW!
Visit my personal investing blog at http://financiallyfreenow.wordpress.com now!
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#6
Retail investors do not need to trade like fund manager because :

WB, John Templeton and many other Greats say almost the same thing one way or another. i like to use this quote:-
“Bull markets are born on pessimism, grown on scepticism, mature on optimism and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.”
i know it's very difficult to follow the above because i am still trying very hard, after all these years.
But where to park your standby investment fund with bank interest rate @ 0.01% - 1.3 %?
i have blogged before one way for people who have reached 55, please do not close your "CPFIS" account. It is now one of the best place to park your investible fund. "Alamak!" i have closed mine; so i lose out a lot lol in interest return for my investment and excess funds.
Anyone who got any good or better idea to park your investment fund please share?TongueBig Grin
WB:-

1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.

Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.

NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
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#7
(23-04-2012, 12:03 PM)Temperament Wrote: But where to park your standby investment fund with bank interest rate @ 0.01% - 1.3 %?

Actually, i believe that it is ok to earn this above rate of return (and real return is negative) for 9 years, as long as the cash allows me to earn multiple folds when that irresistible opportunity arrives in the 10th year. If i manage to earn 100% on that "irresistable opportunity", my CAGR for the last 10years would be a respectable CAGR of 10%.

just 2 cents (and that's just me) Smile
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#8
You are very optimistic but you don't usually have to wait so long(ten years) for a Black Swan or Bear or may be we have hybrid animal Black Swan/Bear animal to appear. The problem is how long can we wait while our funds seem "rotting" away. i suppose no matter what some of our funds have to be in the market to earn some dividend income.
In fact after "fully" invested in 2008/2009, i found i had the highest dividend income of my life. i were tempted to just not to sell anything but the profit was just irresistible in 2010/11/12. Anyway why did i invest in 2008/2009 for?

The rest of the time, be as patient as you can. You should be rewarded for your patience. i try very hard to be patient.
But like you said, that's just me. Everyone is different anyway.Big GrinTongue
WB:-

1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.

Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.

NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
Reply
#9
(23-04-2012, 11:32 PM)Temperament Wrote: You are very optimistic but you don't usually have to wait so long(ten years) for a Black Swan or Bear or may be we have hybrid animal Black Swan/Bear animal to appear. The problem is how long can we wait while our funds seem "rotting" away. i suppose no matter what some of our funds have to be in the market to earn some dividend income.
In fact after "fully" invested in 2008/2009, i found i had the highest dividend income of my life. i were tempted to just not to sell anything but the profit was just irresistible in 2010/11/12. Anyway why did i invest in 2008/2009 for?

The rest of the time, be as patient as you can. You should be rewarded for your patience. i try very hard to be patient.
But like you said, that's just me. Everyone is different anyway.Big GrinTongue

I think the phrase "being patience is a virtue" is best understood through investing.

One perfect example.. sometimes, on book, it may seem easy to identify with values such as "keeping cash and being disciplined to wait for the perfect pitch" but in reality, we jump on every "attractive opportunity", thinking as though we might have found the next gem, when there might always be better opportunities out there..
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#10
(23-04-2012, 11:46 PM)dzwm87 Wrote: I think the phrase "being patience is a virtue" is best understood through investing.

One perfect example.. sometimes, on book, it may seem easy to identify with values such as "keeping cash and being disciplined to wait for the perfect pitch" but in reality, we jump on every "attractive opportunity", thinking as though we might have found the next gem, when there might always be better opportunities out there..

Well, probability of success must be factored in before jumping in. Some opportunities are just fool's gold.
Eg. Intraco, undervalued but what is the probability of a good return? It gets higher after Teh Hooi Ling wrote the article but it still hinges on the management.
Property counters such as Tuan Sing, Hong Fok are highly undervalued too. But, the management do not seem to be keen in improving shareholders' return.
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