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Koon Yew Yin's Blog

Author: Koon Yew Yin   |   Latest post: Sat, 19 Oct 2019, 12:28 PM

 

Why Investors fail? - Koon Yew Yin

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All stock market investors must check their track record to see how they have been preforming. If you have been making money consistently every year, you should find out how to improve to make more money. If you your performance has been poor, then you should identify your mistakes and not to repeat the same mistakes. In any case, you should continue to learn how to improve your performance. They say practice makes perfect.

My most expensive mistake

First I am ashamed to admit my most expensive mistake by buying too many Jaks shares using too much margin finance in anticipation of the future profit from the electric power generation contract in Vietnam. I lost about Rm 64 million which I have openly posted article about my disaster on I3investors.com and on my own blog: koonyewyin.com. The lesson I learned is that never to buy any stock in anticipation of future profit. As a result, I have formulated my share selection golden rule. 

My share selection golden rule:

The company must report 2 consecutive quarters of increasing profit and the price chart is showing up trend before I start to buy. Never buy any stock if the price chart is showing down trend.     

If you google, you can see that many professional fund managers in America cannot even beat the S & P 500 index. Even our local fund managers make less than 10% per year.

Most individual investors often failed because of the following reasons:

1 They rely too much on news, financial reports and professional analysts recommendations. When an investment bank analyst interview a company representative, he always hear good news of the company. No company representative will say that his company has too much problems or not doing well. 

2 They believe in their ability to pick the right stock and wait for the right time to buy and the right time to sell.  They believe in timing the market. Record shows short term or day traders often lose money due the transaction cost. 

3 They do have the required knowledge and experience. Unfortunately many of them do not realise or want to admit that they are really not so clever. Sometime even a company is reporting good profit, its share price does not reflect it. Only investors with the necessary experience know why the share price remain depressed. It take time to gain experience. For example, Thong Guan reported fantastic profit and each share has about Rm 1 cash, yet its share remain depressed. In fact, I have posted my article namely “TA is more important than FA” which you can see from i3investors.com or on my blog: koonyewyin.com.

 4 Fear: They cannot control their emotion of fear, ego and greed to think logically to make the right investment decision. Many clever investors cannot control their fear to buy a good stock even when its price chart and financial analysis are positive, for example Dayang. Again you can read my article on i3investors.com or on my blog: koonyewyin.com.

5 Greed and ego: They often failed because they refused to sell when the company start to report reduced profit and when the price chart is showing down trend. They are too greedy or they are too egoistic. If they sold, they have nothing to boast that they have bought the stock at a much cheaper price. 

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