Key Habits of Successful Investors

Four key habits an investor might want to adopt are: Preserve capital and minimise risk taking; do homework before investing; have an investment philosophy and system; and, be patient.

IT IS a fact that the local market condition is very hard to predict since it is affected by both global and local factors. As an investor, it may not be possible to predict what is going to happen next, but there are certainly ways to learn from people who have succeeded in riding the waves of good and bad times throughout the years.

In the book "The Winning Investment Habits of Warren Buffett & George Soros", Mark Tier listed out 23 winning habits based on the habits of these two of the world's richest and most successful investors. Summarised below, are four main key habits that you might want to adopt as the fundamentals to successful investing.

Successful investor habit 1: Preserve your capital and minimise risk taking
All successful investors preserve their capital as a foundation and they do this through risk minimisation. Most investors have the perception that in order to make profits in the market, there is a need to take high risks and it is right to say that risk and return come hand in hand.

However, in order to ensure a long-term success, you should not just simply take any risks, but only calculated risks. This requires you to analyse the situation thoroughly as to be confident that the chances of having a good result on your side is high.

With that in mind, you would only end up investing in what Warren Buffett calls "high probability events", where the risk of loss is at the lowest and you are almost certain to make money. Always remember Warren Buffett's 'Investing Rules: "Rule No. 1: Never Lose Money! Rule No. 2: Never Forget Rule No. 1"

Successful investor habit 2: Do your homework before you invest
There are nearly one thousand companies listed in our stock market. Which one should you invest in? Having Habit No.1 as the foundation, you will know that the safest companies to invest in should be companies or industries that you are most familiar with, as you can only make good judgments if you have in-depth knowledge and understanding.

This means that you will have to do your own homework and research through all available sources, such as company annual reports, industry reports or public announcements, in order to obtain the facts on the industry, the company of your interest and its competitors.

This is necessary to ensure that you can draw good conclusions on the company's performance and future prospects. Therefore, time and hard work are the two essential elements in turning yourself into an informed and knowledgeable investor. In practicing this, you will also need to be selective and focused on certain industries in which you the have most interest and experience.

Successful investor habit 3: Have your own investment philosophy and system
What is an investment philosophy? An investment philosophy is a set of beliefs that you use as the foundation in developing your personal investment system for buying and selling investments. This will make sure you are fully aware of the reasons behind every investment decision you make. As a beginner in the investing world, you could probably start by following the investment philosophies and systems of some of the great investors that come closest to your heart.

However, along the way, you should tailor your investment system to suit your personality, goals and unique circumstances so that you can practice this entire system without stress and worries.

If you have the discipline to practice the right system religiously, you will not be easily influenced by the voices or rumours in the market and will not be tempted to simply follow the crowd. Hence, the chances of your making the wrong decisions will be minimised.

Successful investor habit 4: Be patient!
There is a Spanish proverb that says "The secret of patience is doing something else in the meantime". If you somehow managed to inculcate the above 3 habits, you will know exactly what you are looking for and as such, will be well equipped with the patience to wait for the right moment to buy or sell your stocks. Both Buffett and Soros stressed the fact that the secret of their success is having the patience to wait. Use your free time to explore and strategise other new opportunities as there are so many companies listed in the market. Always remember that identifying the right candidates does require time and patience.

On a last note, try to adopt the above habits now! Remember, good strategies will only be successful when executed with the right mindset!

Analysing Companies Before Investing

In investing; the three most fundamental aspects are research, research and research! says Securities Industry Development Corp.

IN REAL estate, the three most important factors are location, location and location whereas in investing; the three most fundamental aspects are research, research and research!

In a bearish market, the stock prices for many fundamentally good companies can drop to a very low level. It is during times like these that investors should search for good quality companies that can be invested in for the long-term.

As an investor, one of the most critical steps in identifying good stocks is the understanding of the business. The ever famous investment guru, Warren Buffett has clearly stated that there is no fundamental difference between buying a business and buying shares in the business. In fact, there is a clear link between the two as "if a business does well, the stock eventually follows". These were Buffett's words.

In keeping in tune with Buffett's sentiments, investors need to make stock purchasing decisions by approaching it from the perspective of a business person. You need to have the same mindset as a business person when it comes to evaluating stocks.

Here are some guides on what to look for in a business:

In analysing a business, there are a number of key factors that you need to scrutinise and these can be categorised into two main areas; the company itself and the people who run the company. (Remember,the secret in business today is not about money, technology or ideas alone but its people - really good people!) .

The company

* Product: Single or diversified?
You need to know what a company's business is if you intend to invest in that company. Knowledge of what the company produces is crucial in giving investors an insight into the company's potential and ability to perform. If a company relies purely on a single or very narrow range of products, then you have to evaluate the product carefully in terms of its market dominance, economic characteristics, cost of production and entry barriers. A company focusing on a single product has the ability to tap on its strength. However, despite this edge that such companies have, there is a downside as you will have to analyse whether the product is positioned strongly enough in the market to fend off competition. The risk that companies focused on a single product have to face comes from competitors. The possibility of other products taking over its market position is extremely high, especially in the realm of fast changing technology or fashionable items.

As an investor who intends to avoid such risk, companies with diversified products and long history of successes will be more favourable. Such companies will have the ability to sustain themselves despite the presence of substitutes for one or a few of their products. The availability of substitute goods introduced by competitors may take away a portion of the company's share in the market, but it will have other products that are still strongly positioned in the market to keep itself steady.

A company's future prospect is also highly dependent on the type of products it has. If a company provides a product that is an essential item, one that is needed during good or bad times and it is highly differentiated, then its future prospect is most promising. Such companies will thrive on the fact that substitutes are not readily available, thus not jeapordising their market share. This type of business usually has the power to command the price in the market even when the demand is flat.

* Operating history: New or seasoned?
"Wisdom comes with age". While this is commonly said about people, the same can apply to a business as well.

Companies that have been around for years will be able to provide you with a track record of their performance. With that, you can zoom in to companies that have managed to produce consistent results and those that have weathered tough economic situations. Companies such as these coupled with the ability to manage cost effectively are companies that come with lower risk as compared to their younger counterparts; companies that are still new or have been experiencing changes in business directions and are trying to turn around.

* Ability to grow: Organic or stagnant?
Ability to grow: Organic or It is when the economic situation is weak that investors get the chance to judge whether a company is a growth company or not. Normally, if a company is able to maintain or grow its sales during a weak economic situation, it will very likely be able to grow its businesses even further during an economic recovery. In fact, if a business has been able to grow organically, through innovative products and sensible business strategy, then it has shown that the business itself has the room for future growth. However, if the growth has been achieved through mergers and acquisition, then you will have to be careful as historically, the success rate in marrying two companies with different cultures has been poor. Ideally, you best look out for a company that is able to grow organically and at the same time make strategic acquisitions to strengthen its market position and product offerings.

The people behind the company

* Ability to act in shareholders' interest
A successful company inevitably depends on its management team. Ideally, the management must be able to make strategic decisions in increasing shareholders' value. Their ability is reflected in their track records, performance in their previous companies or investment decisions being made in the current company. When companies retain earnings for the purpose of re-investment, the type of projects they invest monies in and the return on such investments will tell you whether they are putting priority on shareholders' interests or not.

Decisions to hit unrealistic short-term earnings targets might please the market and make the current management team look good, but, in the long-run, this move may hurt the company's prospects, which will in turn affect shareholders.

* Ability to control cost
Exercising tight cost control at all times is something that management needs to practice. However, members of management sometimes have the tendency to build up costs over time. These sometimes fly out of control, and will result in them taking a one-time action to reorganise and restructure. This action will also mean that the shareholders will have to suffer exceptional asset write-offs and severance costs due to redundancies, which might not have happened if careful planning on hiring and capital expenditure control were exercised at all times.

* Corporate governance and uncompromised integrity
A management team with uncompromised integrity means that you can be sure that the management team is always acting in shareholders' interest and they will not be breaking any codes just to satisfy their own interests. Management who share these values are highly valuable to a business and they are the ones you want managing the company you're interested in.

At the end of the day, the results of the factors that have been mentioned above will be reflected in the company's financial performance, which matters most to all investors. Knowing the business will help you to understand the financials better when you move on to the next step of valuing the stock itself.

Malaysian Stocks To Start 'Catching Up'

MALAYSIAN stocks, beaten by regional peers this year, will start “catching up” as the exchange introduces a new benchmark index and the government eases curbs on foreign investment, CIMB Investment Bank Bhd said.

“Malaysia will not lag behind for long,” Terence Wong, an analyst at CIMB, said in the report. “For investors that have missed out on the big gains made by higher-beta regional markets such as Hong Kong and Singapore, Malaysia provides a second opportunity to get exposure to the regional rebound.” Beta is an indicator of volatility.

The Kuala Lumpur Composite Index has risen 17 per cent this year, trailing behind Southeast Asian benchmark indexes. Prime Minister Datuk Seri Najib Razak, who took office on April 3, announced stimulus plans valued at RM67 billion (US$19 billion) to restore economic growth as the nation nears its first recession in a decade.

Investors should buy so-called “high beta bombed-out sectors” such as construction, property and building materials and oil and gas, the report said. Gaming and rubber glove stocks are also “still attractive,” it said.

Malaysia’s stock exchange said on June 16 that Najib will make “significant announcements” related to his plans to ease restrictions on foreign investment at an annual investor conference on June 30 and July 1.

On July 6, Bursa Malaysia Bhd, the country’s stock exchange manager, will cut the number of companies in its Kuala Lumpur Composite Index to 30 from 102, in the measure’s biggest overhaul aimed at removing the smallest and most tightly held companies to attract investors.


The FTSE Bursa Malaysia KLCI will comprise the largest companies by market value with at least a 15 per cent free float, or the portion of shares publicly available for trading.

Funds in Singapore, Hong Kong and Europe are “mostly underweighted in Malaysia,” Wong said. “Malaysia’s status as a laggard market that will catch up with regional peers in this rally as investors ‘rediscover it’ has been reinforced,” Wong said. -- Bloomberg

Buying Momentum To Pick Up

Investors can expect buying momentum to pick up significantly in the weeks ahead, with oil & gas stocks the picks, says a research head

Bullish external leads - from China's manufacturing expansion for a third straight month to Australia's better-than-expected economic growth and surge in oil prices towards the US$70 a barrel mark - helped lift the local stock market to settle at a nine-month high last week.

The Kuala Lumpur Composite Index (KLCI) surged 31.4 points, or 3 per cent, last week to close at 1,075.5, the highest since September 9 last year, with strong gains in Maybank (+7.08 points), Genting Bhd (+3.71), BCHB (+2.61), Lafarge Cement (+2.47) and Axiata (+1.69), representing more than half of the index's rise. Average daily trading volume and value improved to 1.78 billion shares worth RM1.59 billion respectively, compared with 1.58 billion shares worth RM1.61 billion in the previous week.

Signs of waning pessimism are flashing across global economies and different asset classes. Key global and regional currencies have risen to near pre-crisis levels as funds move out of dollar-based assets to other high yielding investments. Equities and commodities in emerging markets, including Malaysia, are the beneficiaries. The impact from these external factors explains why the KLCI performed well last week during what is usually a quiet period.

On a positive note, last week saw many important economic indicators in the US signalling recessionary pressures are abating and a recovery is in motion, albeit at a slower pace, after the massive government spending, liquidity injection and monetary loosening. Personal income and personal spending rose more than expected, core inflation remained low at 0.3 per cent to accommodate prolonged monetary loosening, ISM manufacturing rose more than expected, pending home sales, construction spending and vehicle sales grew beyond expectations.

US job losses in May came in less than expected at 345,000 against a projected 520,000 and more than half the peak of 741,000 in January. Although the unemployment rate stood at 9.4 per cent, higher than the average forecast of 9.2 per cent, this lagging indicator is expected to peak above 10 per cent before trending down next year as economic recovery takes hold. US consumers are expected to loosen their purse strings as confidence improves although the latest report shows consumer credit fell at a 7.4 per cent annual rate.

Locally, the measures taken by the government so far are indicative of a strong resolve to break away from policies that led to inefficient use of resources and were stumbling blocks to achieving the country's long-term growth potential. The attempt to devise a new economic growth model that relies on high value-added products and services is positive.

On the corporate side, the recently concluded first-quarter 2009 earnings season showed a potential reversal in earnings momentum after four consecutive quarters of quarter-on-quarter contraction in earnings. Excluding MAS, net profit grew by 3 per cent quarter-on-quarter and cost pressure has abated with operating margin started trending upwards after three consecutive quarters of decline. These positive signs are expected to be more prevalent in the second half of 2009 and next year, lending credence to an earnings recovery story as indexed earnings are expected to grow by 15.1 per cent in 2010 after contracting by 6.4 per cent this year.

Thus, expect the huge liquidity and positive momentum on account of improving external economic climate, especially in the US, and strengthening corporate earnings to drive the KLCI to hit 1,200 by year-end based on a three-year average PER of 15.4x. Technically, do not discount the possibilities of it testing the 1997 high of 1,278.9.

Investors are advised to increase their exposure to oil and gas, construction, building material, gaming, infrastructure and high beta stocks to ride on the upside potential.

Technical outlook

The local stock market coat-tailed sharper rallies in the region last Monday after manufacturing in China surged for a third consecutive month in May, fuelling hopes that the worst of the global recession is over. The KLCI rose from an opening low of 1,047.62 to break out and close above 1,060 on that day. However, stocks gave back early gains the next day, as North Korea's plan to fire more medium-range missiles rattled investors. Consequently, the index dipped from a fresh eight-month high of 1,072.07.

The market extended losses mid-week, as further profit-taking offset the firm showing in the region on the back of a rebound in Australia's economic growth and stronger US home re-sales data, forcing the KLCI to close at the day's low of 1,055.40 on Wednesday. Nonetheless, buyers returned the next day to lift the index despite weaker regional markets. The local market ended the week on a high note after an overnight rebound on Wall Street.

The daily slow stochastics indicator for the KLCI is inching deeper into the overbought region following last Friday's sharp rally (Chart 1), but the weekly indicator hooked up and is set to trigger a buy signal at the extended bullish zone. The 14-day Relative Strength Index (RSI) meanwhile has just crossed above the bearish divergence downtrend line, which is a bullish breakout signal. The 14-week RSI however is just below the 70-point mark and is poised to rise into the overbought zone.

The daily Moving Average Convergence Divergence (MACD) trend indicator, however, has recovered with a hook-up to indicate a return in bullish momentum, while the bullish expansion on the weekly MACD signal line suggests a stronger uptrend ahead. Moreover, the +DI and -DI lines on the 14-day Directional Movement Index (DMI) trend indicator have again expanded positively, with the ADX line flashing a bullish reading of 41.1.

Conclusion

The bullish breakout above the bearish divergence declining line on the 14-day RSI last Friday is key to promote further upside momentum on the KLCI this week. More bullish signals from daily and weekly trend indicators will offset short-term overbought signals. Hence, investors can expect buying momentum to pick up significantly in the weeks ahead.

Sector-wise, our top pick remains the oil & gas space, with stocks such as Petra Perdana, SapuraCrest Dialog, Kencana, KNM, Perisai, Tanjung Offshore and Scomi Group anticipated to surge further and please investors who are overweight this sector. The key reason for this is the strong uptrend in crude oil prices. Plantation stocks such as IOI Corp and KLK should also perform as CPO prices play catch-up to crude oil given the more attractive and cheaper biodiesel alternative fuel.

As for the KLCI this week, a convincing breakout above 1,078, the 38.2 per cent Fibonacci Retracement (FR) of the bear run from the all-time high of 1,525 to the pivot low of 801, will fuel upside towards next resistance from 1,100, which is purely psychological. Looking ahead, even higher levels can be challenged in coming weeks, with 1,138, the 2.236X extension of wave A, as next upside target on a breakout above 1,100. On the downside, immediate support is revised higher to 1,065, with 1,055 and 1,045 acting as stronger support platforms.

Source: Business Times

KLCI: V Shape or U Shape?

KLCI has been uptrend since early Mar'09 and it continous to show good performance and indeed did not dissappointed me trying to hit my 1st target at 1100 points (Refer Dec'08 Post). Base on the current trend I can said the KLCI has potential to forward to 1200-1250 level. BUT once reaching this level I can said we must confirm what recovery shape does KLCI apply. For V shape recovery the correction should not go below 1160 and if correction breakdown from 1160 it has potential to reach below 1000 points which will be in U shape category and the KLCI will trading range bound within the specified range and the uptrend momentum will be slow! So let us wait and see what type of shape our KLCI will be heading. :-) Happy Trading!

[Previous KLCI Posting]
http://bursabulltrader.blogspot.com/2009/04/klci-riding-up-hill.html

Economists Positive On Economy After 1st Quarter

THE Malaysian economy probably bottomed out in the first quarter, with market expectations of an improvement leading to growth again in the last quarter.

Economists said they expected manufacturing output in the first quarter to fall nearly twice as much as in the fourth quarter of last year, although the services sector was likely to continue registering growth.According to a Business Times poll, the economy is expected to contract 3.47 per cent in the first quarter.

Gross domestic product (GDP) this year is forecast to contract 1.52 per cent before turning around and growing 3.2 per cent next year.

Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz, who will release the first quarter GDP data tomorrow, had said that the economy might show signs of improvement in the third quarter and subsequently register growth in the final quarter.

DBS Bank economist Irvin Seah has revised downward his forecast for first quarter GDP to -3.4 per cent from 0.5 per cent.

"We had earlier expected Malaysia's economic growth cycle to bottom out in the middle of the year, but higher frequency data such as exports and industrial production numbers are suggesting that the worst of Malaysia's quarterly GDP growth is probably now behind us, that is, in the first three months of the year," he said.

Seah said the main drag on the economy in the first quarter came from the external front, in line with the region's poor export performance.Malaysia 's exports collapsed in the first quarter, posting an average contraction of about 20 per cent year-on-year and pushing industrial output into reverse gear for a decline of about 16 per cent.

Seah expects the manufacturing sector to be the worst hit, with growth likely to fall by about 21 per cent in the first quarter, while the key services sector is expected to grow 5.3 per cent.

He is looking to an improvement in GDP growth numbers to -2.8 per cent, -1.7 per cent and 3.2 per cent in the next three quarters.

Citi economic analyst Leon Hiew said that while the January-March period was likely to see the first quarterly real GDP contraction since 2001, the latest March data suggested that Malaysia might already be at or past the bottom.

The drop in first quarter GDP will likely prompt a downgrade in the official forecast for the year, possibly to -1 to -3 per cent, he added.

Selena Ling, an economist with OCBC Bank, described the upcoming first quarter data as a "reality check" that the Malaysian economy was not immune to the global recession and would prompt the government to revise downward its growth forecast.

"Should the unfavourable combination of a domestic recession and easing commodity prices persist, the policy implications may be that the door is not ironclad for further interest rate cuts down the road," she said.

TA Research economist Patricia Oh also expects the economy to contract for the first three quarters before resuming growth in the fourth.

"The fiscal stimulus measures may be reflected by the end of the year, while private consumption is likely to rebound as consumer sentiment improves," she said.

- By Rupa Damodaran

Market To Remain Active

Market to remain active on pump-priming moves

Kenanga's head of research says he is maintaining his year-end target for the Kuala Lumpur Composite Index at 1128.

THE local market is expected to remain active, in terms of trading volume and value, due to the government's pump-priming initiatives, says Yeonzon Yeow, head of research at Kenanga Investment Bank.

"At this point, the market volume and value traded seems to be healthy, drawing back both local institutions and, to a certain extent, foreign institutions," Yeow told reporters after K&N Kenanga Holdings Bhd's shareholders meeting yesterday in Kuala Lumpur.Speedy implementation of the initiatives under Budget 2009 and stimulus packages will help compensate for the sharp fall in Malaysia's exports.

Exports fell for a sixth straight month in March as overseas shipments dropped 15.6 per cent from a year earlier.

Yeow said he was maintaining his year-end target for the Kuala Lumpur Composite Index (KLCI) at 1128.

The KLCI ended 11.48 points higher at 1023.49 yesterday, driven by overnight gains on Wall Street. Gainers outnumbered losers 544 to 158 and turnover was 1.754 billion shares valued at RM1.599 billion.

Yeow is optimistic about the local market, saying that it is a matter of time before signs of an economic recovery were in sight.

He said the banking sector is doing better as seen in the rising of non-interest income and loan growth experienced in the first quarter of 2009.

"Sentiments have turned very positive as seen three weeks ago when I was visiting manufacturers in Penang. Many said they are having better visibility of up to three months as opposed to a visibility of one week experienced last December," he added.

He also said that influenza A (H1N1) would not have a significant impact economically on retail sales and cross-country businesses in Asia.Meanwhile, Kenanga group director Tengku Zafrul Aziz said the group has implemented key performance indicators to track individual deliverables under Kenanga's transformation plan.

The transformation plan is aimed at growing the group's financial services, becoming cost-efficient and enhancing profitability within a year.

Kenanga's latest initiative will also see the group strengthening its investment banking unit, which has secured some RM1 billion worth of mandates under its private debt securities services.

Palm Oil Above RM3,000?

SINGAPORE: Palm oil futures traded on the Malaysia Derivatives Exchange could exceed RM3,000 a tonne "very quickly" because of a "strong" increase in consumption and production problems, an industry analyst said.

There was "a powerful bull market which has yet to realise its full potential," Bloomberg quoted Dorab Mistry, director of Godrej International Ltd, as saying yesterday in remarks prepared for an industry conference in Tokyo. Palm oil traded yesterday in Malaysia at about 14% less than Mistry's target threshold.

India, the largest consumer of palm oil after China, may boost consumption of all vegetable oils to 12.8kg per head per year in the 12 months to October, about 12% more than the year before, Mistry said in the remarks. Godrej is one of the largest importers of edible oils into India.

"Price-conscious markets like India will chase palm," he wrote in the address, saying there had been a "phenomenal" rise in the nation's usage of vegetable oils. "India's imports of vegetable oil will continue to exceed the previous year's.

"Palm oil for July delivery dropped 3.2% to RM2,580 a tonne at the 12.30pm trading break. Still, the world's most consumed cooking oil has advanced 52% this year. In 2008, the contract plunged 44% amid the global recession.

"It is not wise for me to speculate on how high prices will go," Mistry wrote, without giving a precise forecast. "However, the powerful injection of liquidity in all our economies must create inflation at some point down the road.

"Central banks worldwide have been printing money to combat the global recession, triggering concern that inflation may accelerate. Some investors buy commodities, including palm oil, to hedge against increasing consumer prices.

Palm oil exports from Malaysia to India in the first four months of the year more than tripled to 608,440 tonnes, according to independent cargo surveyor Societe Generale de Surveillance (SGS). The surge made up for the 12% drop in exports to China to 1.14 million tonnes from the same period a year ago, SGS said.

Global demand for five major edible oils, including palm oil and soybean oil, will probably rise by 4.5 million tonnes in 2008-2009, matching the increase the previous year, Mistry said. Still, global supply growth will slow to 2.85 million tonnes compared with 5.65 million tonnes in the last crop year, he said.

Mistry didn't give a forecast for soybean oil, while highlighting a reduced soybean harvest in Argentina, and lower-than-expected planting in the US.

Soybean oil traded in Chicago has gained 12% this year to 37.66 cents a pound at 12.45pm Singapore time yesterday. The oil trades at a 14.9% premium to palm oil, according to Bloomberg data.

Meanwhile, ECMLibra Investment Research remained overweight on the plantation sector, but was looking to review its call on the sector depending on production expectations at home and soy market developments abroad.

When Investing, Control Your Greed And Fear

We need to know who we are in order to do well in stock market investing.

THE recent strong market rally caught many investors by surprise again.

Most investors, including some analysts, predicted earlier that it was just a bear market rally. They have been hoping the market will turn down again. Unfortunately, it has been moving up strong without looking back.

For investors who have not invested during the recent low in March 2009, they are getting very worried as they are not benefitting from the recent rally. They may even wonder whether they should jump in now in order not to miss the boat.

Another group of investors, who have managed to catch some stocks at cheap prices during the previous market low, are also facing the dilemma of whether to lock in their gains now or continue to hold on to their gains. Some even regretted selling their stocks too early last month.

We all know that it is very difficult, in fact impossible, to predict stock market movement. Most investment gurus will refuse to time the market.

Howard Kahn and Cary Cooper published a book titled “Stress in the Dealing Room” in 1993. According to their surveys done on 225 dealers, 73.8% of them suffered from fear of “misreading the market.” Most dealers have the same problem of acquiring and handling information.

We believe that in order to do well in stock investing, we need to know ourselves, especially in controlling our emotion on greed and fear.

Due to information overloading, our emotion is highly influenced by the news that we read. Each time we feel that the market is getting bullish and time to buy stock, the overall market will collapse the moment we enter.

On the other hand, the moment we fear that it will drop further and we have decided to cut losses, we will notice the market will recover after that. Most of the time, the prices of stocks that we sold were at the lowest of the recent fall.

In order to control our greed and fear, we need to ask ourselves whether the market has discounted the news that we have received.

For example, many analysts have been bullish lately, having the opinion that the worst may be over for the market based on the recent economic indicators which showed that the overall economy may have stopped contracting or is on its way to recovery.

Nevertheless, the recent strong market rally would have discounted this bullish news. In fact, we need to ask ourselves whether the current stock prices can be supported by the fundamentals for certain listed companies.

In our experience, in most cases, the moment we feel like buying stocks is the best time to sell them while the moment that we feel like selling them is in fact the best time to buy. We can apply this contrarian theory quite successfully in most periods.

Sometimes, if we are taking in too much contradicting information and, as a result, get confused over the market direction, we feel that the best strategy is to stay away from the market until we have a better and clearer picture of the overall market or the economic situation.

We should not be influenced by other opinions.

There are times that we need to follow our heart. Sometimes, our hearts try to warn us from taking hasty investment decisions. However, we refuse to follow our intuition but instead, choosing to get influenced by others or the information that we read and ending up making mistakes.

In conclusion, we need to maintain our concentration.

We should not be led by the market sentiments regardless whether it is on the way up or crashing down fast. We need to go back to the fundamental of economic situation and the companies’ performance and future prospects.

One way to minimise the feeling of regret is to stagger our purchase and selling. We will only know the peak when the market starts turning downwards and vice versa. Therefore, by staggering, we will have an averaging effect rather than taking a one-time hit, especially if it is at the wrong timing.