The benchmark KLCI fell below 1400 last week. (week ending 30th Sep 2022)

The Bear Market has become even more vicious. 

You are not alone. 

Many investors who bought stocks this year or last year have lost money.  See the latest results of Stockpicks in https://klse.i3investor.com/web/blog/detail/stock_pick_2022/2022-09-30-story-h1649995415-Stock_Pick_Year_2022_30_Sep_Result 

Only 2 out of 76 had positive returns!

Last week, I suggested putting some money aside for stock investing. 

The simple reason is, generally stock prices now are lower & cheaper than last year or few years ago. 

As a longer term investor, I favour buying at low prices. 

Remember, BUY LOW, SELL HIGH. 

Of course, a stock that keeps falling usually has good fundamental reasons for its fall, but BUY LOW SELL HIGH seldom disappoints. 

With KLCI now at 1394.63, do you think the stockmarket now is low or high? (Early Jan 2022, ​KLCI was around 1549.05)

Some think that KLCI could fall even more to reach March 2020's low of 1219.71. 

That is possible.

But one also shouldn't forget that 10 years ago, KLCI was above 1600.

With KLCI at 1394.63 now, many stocks are at low prices. 

There will come a time where KLCI will reach 1600 and many stocks shall be at higher prices.  

We just need to hold until that happens.

Besides, I also suggested reading stock investment books, e.g. Peter Lim Tze Cheng's "What I Learnt as An Analyst 2nd Edition". https://trident-analytics.com/shop/what-i-learnt-as-an-analyst/ , 冷眼 Fong Siling's 《30年股票投资心得》, etc.

Many "investors" jump straight to buying stocks without learning some basic stuff first. 

It's always better to know a bit of something than nothing at all. 

That way, you can identify companies with stronger business fundamentals to invest in. (and avoid losing money avoiding value traps like "A Really Big Bargain", unlike me a few years ago) 

Many nuggets of investing wisdom are found inside such books. 

I recently revisited one chapter of《30年股票投资心得》, which was called "怎样减少亏损？/How to Reduce Losses" with 5 Tips given by Mr. Fong. Below is my translation of this chapter, and all rights and credits go to Mr. Fong Siling, because it's not my intellectual property. 

1. Take a Contrarian approach, buy as low as possible, the lower the better.

Most stocks would have a difference of 10% or more between its high and low for the year. Whether you make money or not, depends on which price you buy in.

If the highest price is RM5, lowest RM2, the margin of difference is RM2. (RM5 -RM2=RM3) (don't ask me why is the calculation in such manner, quoted from book) If you bought RM2-RM3, your chance of profiteering is almost double than RM4-RM5.

 Buying stocks at low prices, despite stockmarket reverses, you still have enough time to dispose the stock, the probability of losing is greatly reduced.

To buy at low prices, must have contrarian habit, when stockmarket pessimistic then enter. 

Such situation is like shopping mall having big discount sale. 

But many people are the opposite, when share price don't move don't buy, when share price high only chase, no wonder many people lose more than earn. 

Generally goods selling at lower prices would have more buyers but only stocks, the lower the share price, the less people buy, the higher price, the more people buy.

(probably my favourite approach, but one still has to check whether company fundamentals has deteriorated, which caused the share price to justifiably fall.)

2. Buffer area. 

After you have bought a stock, the probability of profiting & losing is 50%-50%, because there's equal chance of the stock going up or down. 

When a stock has gone up 50%, you are already in safe zone, just like in a battlefield, if you have a buffer distance, the enemy's bullets can't reach you & you are in safe zone.  

When you are in safe area, one should let the profits run but most people take profit. 

"It is never wrong taking a profit", this phrase causes one to kill off the golden goose. 

Mr. Fong said the correct way is, if the company continues to improve its financial performance, don't sell. If the stock has chance to rise 200%, why take profit at 100% up?

(this doesn't seem to be good advice for plantation stocks this year though. Anyhow, I've no idea how to translate 缓冲区 into English)

3. When share price & fundamentals concur. 

If a company loses money, and doesn't seem to rebound in near term, despite share price falling quite a bit, also must sell, or else, you may lose even more, may even lose entire capital. 

4. Set a stop-loss.

E.g. 10%.

5. If you are unsure, sell half. 

Self-explanatory.

​​​CONCLUSION:

"The time of maximum pessimism is the time to buy. And the time of maximum optimism is the best time to sell."

Nope, I did not say this. Legendary investor Sir John Templeton said this. 

But isn't it good advice for all of us?

Disclaimer: This article is not tailored financial advice, but mere general stock sharing / observations. Please do further due diligence. The author disclaims all liabilities from readers.