Recently, I wrote an article titled, “The Most Important Thing: 2017 Christmas Reflection in FVI” in the link below,
https://klse.i3investor.com/blogs/kcchongnz/142299.jsp
The article received a total 137 comments. Thank you very much for all the comments, good or bad. I am always very happy to receive comments, although you may find me defensive. What is the point of writing when no one comment? No fun. Please continue to do so.
The comments motivate me to write this new article. Here it goes.
There is an awful lot of bad advice out there when it comes to investing in stock markets. Like rumours, these myths get told and retold as if they were true. They spread like wildfire even though they are flat out wrong.
Some of these myths are just plain dumb, some are deceptive…but almost all are downright dangerous! It is time you know what these dangerous myths are, so that you are in a better position to side-step them.
So, let’s get started right here, right now!
In investing, you don’t need to know how to read financial statements.
Really ah? Are you sure you are talking about “Investing”, or something else?
How do you determine if a business is a good one, a bad one, or an ugly one?
“An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative.” Benjamin Graham.
Now you know why 90% of investors don’t succeed.
Speculation is fun. I made a lot of money from it over the past few months.
Smoking is fun for those who do it. A small percentage of them can live very long too. But for most, it kills if you do it for long. The problem is most punters brag about how much money they made, but always conveniently forget about how much they have lost.
You need to make complicated calculations, formulae in investing.
Who said so? The only thing which may be complicated is the discount cash flows analysis to have a feel of the value of something. It is just like an extra wedge in your golf bag, but one doesn’t really need it in investing.
In investing, you don’t need to calculate anything. You only need common sense, and business sense.
I don’t know how other disciplines decide on how to invest. FVI practitioners do use some calculations. They are however very simple calculations involving just additions, subtractions, divisions and multiplications. Anyone with a secondary school education with a calculator can do it.
Otherwise how does one determine if a business is a good business?
Is a business a good business if you need to invest RM1m to get a return of RM10000 a year?
Is it worthwhile to buy the business above for RM500k?
Isn’t that “common sense”, and “business sense” to get answer to the questions above before “investing”?
Otherwise, what “common sense”, or “business sense” you are using? That you hope the business above can be sold to someone at RM10m the following year?
This stock is recommended by this popular investment blogger, sure make money one!
I am sure you have made some money following some popular bloggers. But did you consistently make money from all their recommendations?
!@#$%^&*
I have been following one very popular local investment blog a few years ago but I have stopped doing so for a long time already. I recalled most stocks recommended came with beautiful stories but none accompanied with any solid fundamentals. Most of them went to big losses even though KLCI has been in the uptrend for the last few years.
I must follow this super investor, sure make money one. After all, he has made so much money in the stock market and that is why he is so rich. He must be always right.
Good on you to follow him and if, only if, he is always right, or at least right most of the time. Bear in mind, some people can become very rich for many reasons. Even they become rich in the stock market can also be from various means of making money. But think about it, in the stock market, unless you are investing in a good business for long-term, at good price, which everyone will make money due to the growth of the business. In the short-term, some people will win and some will lose, and the winners must be making it from the losers.
It is unwise to invest for long-term in Bursa. In the long term, everyone is dead.
That’s true, but if you play for the short term, you can die of shock even earlier.
In my article appended below,
https://klse.i3investor.com/blogs/kcchongnz/132542.jsp
I have shown The Busy Weekly compiled a list of 20 “bull” stocks which returned over 1000% over the last 10 years.
Investing for long-term means one must hold the stock forever.
While Warren Buffet may never sell his See Candy, Gillett, Coca Cola, etc., that is not what FVI does. FVI buys good companies at reasonable prices, hold them until there is structural change and the companies are no longer good companies, or prices may have risen so much above its intrinsic value, then they sell and look for another one.
FVI 100% sure make big money
That is not what FVI practitioners claim. We don’t think others can sure to make money in investing too. It makes me don’t know want to laugh or cry when someone claimed that the banks guarantee investors of this company make money. It is outrageous!
FVI practitioners do believe, in the long-run, FVI will probably provide satisfactory return, with lower risks.
It’s easy to time the market.
I always amazed at some day traders claiming making so much money getting in and out from the stock market with all the transaction costs. They sure count every time they win, but wonder did they count when they lose?
This is what the founder of Vanguard Group, Jack Bogle, not me, said:
“In 30 years in this business, I do not know anybody who has done it successfully and consistently, nor anybody who knows anybody who has done it successfully and consistently. Indeed, my impression is that trying to do the market timing is likely, not only not to add value to your investment programme, but to be counterproductive.”
You use RM1m to buy this hot stock for RM10. Its share price has doubled from a year ago to RM20. Now you should use your share collateral to borrow another RM2m to “sailing”, and this stock will double again in a few months and you will make another RM4m, or 200%. If you don’t do it, stupid!
Of course, margin magnifies your return and it is so easy to get rich, very rich. Money sure fall from sky.
But what if after doing that the share price drops back to RM10, or even RM5?
In order to make money in the stock market, you must take high risk.
FVI doesn’t believe in the above, instead, they believe in,
Good stocks bought at cheap prices = Low risk = High return.
Bad stocks or even good stocks bought at very high prices= High risk = Permanent loss of capital.
Why must one take high risk to make high expected return when you can get high return with low risk?
To make big in the stock market, I must “sailing” (all-chips-in-one)
This brings back to point no. 8, is there such thing as sure-win stock?
What if you “sailing” on it and it turns out you are wrong, very wrong?
Concentrate in a reasonable number of stocks to grow your wealth. Diversify to preserve it.
Now what to do?
That is the question! But what do you think?
You see, anyone can be successful in investing, provided you follow the “right path”. And so can you. But you need to have the right mindset in investing and treat investing in a stock as investing in part of a business. Have some knowledge on the language of business so that you can understand the business and knows how to evaluate the business. Have your own independent thinking and not follow blindly.
Even though you may engage someone knowledgeable in investing, you must also know how to evaluate him if he does the right thing for you.
Remember, you and you alone are the most capable and reliable person alive to manage your money. It’s high time you start believing this. It’s high time you start making your own investment decisions, and take control of your financial destiny.
Don’t worry if the magnitude of the effort bothers you. As the famous Irish poet Oscar Wilde once said, “The final mystery is oneself.”
Happy New Year and a new beginning in investing, I hope.
K C Chong (ckc13invest@gmail.com)
http://klse.i3investor.com/blogs/kcchongnz/142664.jsp
