kcchongnz blog
“Is making money easy in the stock market?” kcchongnz
“Dear Sir;
I am C. I am buying share by recommendation from my friends and colleagues. I do not study background of the company and buy the share blindly. Many shares were purchased at peak price and now many of my share price are still lower than purchased price. My hard earn money is still stuck in the share market.
I do not have skill to pick good company for investment. I will retire in Oct next year when I reach retirement age of 60. I hope I have more free time to learn new things.I would like to learn from you and your advise for FVI knowledge.
Please kindly accept me to be your student.
Thank you and Regards
C”
In my last article in i3investor in the link below,
https://klse.i3investor.com/blogs/kcchongnz/138098.jsp
I discussed about investing using the fundamental approach with a long-term horizon, and with patience, the outcome of your investment will likely to be satisfactory. In my case, it happened to be very good.
I received the comment above. It is a very frank and honest comment from a matured person. Thank you, Mr C. I think you make a right move; to learn about fundamental value investing (FVI), which I think probably is the only way out of your predicament.
I can’t help myself not writing this new article, which I have done it in many ways a number of times in i3investor. My motivation of this article is because I think many people, I would say 90% of those people who like to dabble in the stock market need this, whether he is young or old, how many years in the market, seriously. Maybe I can say it is more out of some true “noble” intention. LOL.
The proportion of people in the stock market using true FVI approach is really very small. Maybe even less than 5%. In my circle of friends, besides those who have gone through my FVI course, I hardly found any. That is why I think FVI is still working in Bursa, and it will continue to work for a long time.
How do most people invest?
There may be a lot of people who seem to be good in investing in the stock market, and some do make some extra-ordinary returns in a short period of time. However, most have lost money, and quite a number of them have lost huge amount of money. And that is not surprising.
I have friends, friends of friends had previously speculating in the stock market just like what Mr. C does, following stock tips from friends, colleagues, bloggers, and worse still some famous individuals, chasing stocks without fundamentals touted by them which were already at dizzy high, thinking that they would help them to make money speculating in the stock market. Think about it, speculating in the stock market is a zero-sum game, and if they help you to make money, who lose the money to you? Those who give tips to you? I personally had been there, done that, and of course had lost money before.
All I have heard of is people speculating in the stock market had lost money, often huge amount of money, so much so they love this song from Rod Stewart “I don’t want to talk about it” so much, and now completely have no interest in investing. I hardly heard of any exception.
Yes, Mr. C, it is that bad, and you are not alone. So, stop doing the wrong thing over and over again. If you do not learn something about investing following the “right path”, or follow someone who can provide you with proper guidance, please, my very sincere advice is, get away from the stock market. Do not look at it, especially you are now retiring soon. Do not risk your retirement money which you may need it for many years to come.
But is it really true that most retail investors lost money in the stock market, or is it just a myth? Why can’t you be an exception?
What do the research say about the investing experience of retail investors?
Below shows a chart in JP Morgan’s 1Q 2014 Guide to the markets regarding the 20-year returns of some asset classes.
Based on their analysis, the average investor had a 2.3% annualized return over the 20 years from 1993 to 2012, way underperformed the market return of 8.4% during the same period. To put that into perspective, an investor invested $100,000 in the S&P500 20 years ago would today have a total portfolio of around $502,000-compared with only $156,000 for the average investor. This return is not even enough to beat inflation of 2.5% during the period. The total money left 20 years latter can’t buy the things one could buy 20 years ago.
Brad M. Barber and Terrance Odean in their paper “The behaviour of individual investors” confirms that collectively individual investors trading on their own under-performed the market. However, this average performance of individual investors masks tremendous variation in performance across individuals. This means those savvy individual investors would have done much better than the average, and the lower half of individual investors much worse than the average. Many of them lost their savings completely. The underperformance was due to information asymmetry, overconfidence, failure to diversify, easily influenced by rumours, tips, media and internet forums etc., and last but not least, sensation and action seeking, going in, make one of two sens, and out, and in again, and doing the same thing over and over again, like this gentleman below, “dabbling” in the stock market.
“Dear Mr KC Chong,
I am impressed with the performance your stock pick and your transparent way of showing it to everybody in i3.
I am a retiree and I dabble in the stock market and what I had is just the opposite of what you mentioned. Win small and lose big. I ma interested to join yr service of your stock picking. Kindly advise how do I join you service and what do I have to pay and other relevant details. Thank you very much for your advise.
Best Regards,
Paul”
Paul, you have made the right decision to learn about FVI. However, for the financial wellbeing of your retired life, please do not “dabble” in the stock market. You may have read some people in out in out the market and seemingly have made a lot of money doing day trading, making one or two sen and then “Jau”, and then doing that again and again. Frankly, it is hard to believe one can make money doing that. For example, at the market condition now, how to make money in buying Sendai at 93 sen and hope to make one and two sen and “cabut”? It keeps on dropping for the last few days. Maybe he has been “cut loss”, “cut loss”, and “cut loss” already, and eventually one huge loss can’t make back a fraction of those many small gains.
Think about it. Getting in out in out would have “eaten” up by fees in commissions of remisiers, and other transaction costs. I know of somebody who has to pay a high 0.6% commission fee because his is a margin account. Transaction costs alone already amount to tens of thousands of Ringgit in the last few months because of getting in and out of the market with small differences in prices.
Also think about it. In the stock market, 80% of the players are fund managers, institutional investors, syndicates, rich people, manipulators etc. These people also trade in order to make short-term profit. What is your chance in this zero-sum game?
The peril of speculating in the stock market
Back in Bursa about five years ago when I first started dwelling in i3investors, some people in the forums asked me about stocks whether they are investable of not, and I have summarized those lemons and recorded my first article “2014 Christmas Reflection of Pitfalls Investing in the Stock Market” below:
http://klse.i3investor.com/blogs/kcchongnz/67199.jsp
All those stocks, nine of them, except for only one which happened to just recovered recently, tanked and lost 80%-90% for most of them.
That is the peril of speculating in the stock market. It is time for you to stop being a patsy!
What should one do in the stock market?
If one still wants to earn some satisfactory return from the stock market to counter the gremlin of inflation and longevity risk, he has two choices;
- Get some guidance on investing from someone following some proven successful processes and methodologies in investing for long-term and let the power of compounding works its way.
- Learn about the nitty gritty about investing. Note the emphasis of “investing” and not “speculating”.
I must emphasize here that that the investing process must view buying a stock as investing in part of a business. A business must be good but most of all one doesn’t have to pay through his noose for it.
FVI doesn’t guarantee you to make big money, especially in short period of time, but certainly it will prevent you from making huge losses. It is likely the FVI can provide you with satisfactory return over longer period of time as shown in my experience in the link below,
https://klse.i3investor.com/blogs/kcchongnz/138098.jsp
In my own experience, it may even provide with very good return in short period of time which I have shown many times in i3investor. One example is as below,
https://klse.i3investor.com/blogs/kcchongnz/137874.jsp
[Hi KC,
Thanks for service that you give, for last till present I have make a return of around 50%..So I would definitely won't want to miss the future boat...
Count me in ..
Thanks..
Blanked]
There are a lot of resources and help out there. My service is just one of them.
Seek help but remember there is no free lunch in life, the same for investing. Otherwise, get out from the stock market and think hard in other ways how to accumulate more or preserve the real worth of your money during retirement. Make sure you have enough to last your retirement, which could be 20-30 years down the road.
KC Chong (ckc13invest@gmail.com)
Certified Financial Planner
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Discussions
2 people like this. Showing 22 of 22 comments
Of course it is easy, all you need to do is make a new cryptocurrency and sell it, many people willing to turn their fiat money into Bitcoin.
2017-11-16 22:28
Buy stocks when most people fear.
Many Malaysian stocks have been extremely undervalued. You can start buying stocks which have next QR announcements this month. Some of them are on a bagain sale!!
2017-11-16 23:27
Thanks for the chart, it's a sobering fact there are much more losers than winners.
2017-11-17 07:11
The 2 authors also wrote a research paper titled 'Boys will be boys' on how male are generally overconfident compared to female and as a result trade more to the detrimental effect of lower return. And I think this is important. One does not become something just because they associate themselves with it. We can read Ben Graham, Warren Buffett and understand the principles of value investing but it doesn't make us a value investor. All value investor like to think 'we are 'better' than those average investors'. That is a dangerous mindset. I can categories myself as a 'value investor' but carry on with the behaviour of checking the share price everyday. I am not criticising value investing, the principle is sound, but the danger lies when someone confuse themselves between investing and gambling. And value investors are especially vulnerable to this illusion when they think they are practising VI just because they are familiar with the concept. This is probably just as applicable to other type of investor i.e fundamental, growth or whatsoever.
The point is - Overconfident permeate the entire investing community no matter what you like to think yourself are. And it is not what you think you are i.e I am a value investor that determine your long-term return, but rather it is the attitude one carries in the market that determine if he makes or loss money in the long run. Market is blind to categorisation. He doesn't care what you like to categories yourself as, if you don't have the right temperament, if you don't practice skepticism, humility, you will be part of the statistics.
2017-11-17 07:58
If it is so difficult for many people to make money, then you shouldn't put your money in it.
But this value investor want to play with fire, they will tell you this Ponzi has value, people do not buying into this Ponzi that no longer work. If there is choice, one is easy to make money for everyone, the other is that make money in the expense of other people, I will choose the former. this Ponzi is created by the old generation and expecting the younger generation to foot their bills, fat hope!! They will make their new system and obsolete the old buggy system.
2017-11-17 12:26
Posted by valuelurker > Nov 16, 2017 10:23 PM | Report Abuse
In the first place, dont go creating your own acronyms graham will be turning in his grave go bless his soul. secondly, everything you ever need on fundamental analysis is freely available on the internet, and there are free lunches, just not from you. so say so, and dont go around saying there isnt and proclaiming yourself to be saviour
"acronyms"? What "acronyms" in this article you are referring to? Please elaborate.
"graham will be turning in his grave"? Why? What has this article to do with Graham?
"secondly, everything you ever need on fundamental analysis is freely available on the internet"
True true true, and that was what I said in the article as appended below too, didn't I?
"There are a lot of resources and help out there. My service is just one of them."
"and there are free lunches, just not from you."
Maybe you are right above. Hence I never "proclaiming yourself to be saviour", did I?
Do you provide "free lunch"? Are you a "savior"?
I don't think so, but I think even you do, I doubt anybody will take your "free lunch", or look at you as their "savior".
2017-11-17 17:38
Posted by PlsGiveBonus > Nov 17, 2017 12:26 PM | Report Abuse
If it is so difficult for many people to make money, then you shouldn't put your money in it.
But this value investor want to play with fire, they will tell you this Ponzi has value, people do not buying into this Ponzi that no longer work. If there is choice, one is easy to make money for everyone, the other is that make money in the expense of other people, I will choose the former. this Ponzi is created by the old generation and expecting the younger generation to foot their bills, fat hope!! They will make their new system and obsolete the old buggy system.
Investopedia defines Ponzi scheme as "a form of fraud in which belief in the success of a non-existent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors."
So which is closely resemble a Ponzi scheme; the Bitcoin thingy you have been harping and harping and harping, or my value investing?
2017-11-17 21:16
The idea itself is contradicting itself
Investment and "quick return to the first investor"
We are brainwashed by the idea every profit come at the expense of later investors.
So stock market isn't Ponzi, because the IPO launched and insider made all the money, not even the first investor can make some profit, what a brilliant idea. Now everyone want to access the value of Bitcoin, they can't access it, so they call it Ponzi. :D
2017-11-17 22:39
This is hot topic we talk about making money.
But what is money at the first place? Who make the money? How money is valued? Blah, blah.
First, money is nothing more than a piece of paper with perceived value, everyone with power can make more money with just a press of button, the person is central bank, who give them the power to do so?
In my opinion money is an intellectual property just like any computer or software, it has no tangible asset and value, nothing, what is Bitcoin has value? It has intellectual property value, and it is far superior to your money that is inflationary. You don't like intellectual property? Then you don't like money.
2017-11-18 18:06
What IP blah bla bla...Simple !! Bitcoin has no borders, not boundaries..Its cross borders, cross boundaries, its A GLOBAL VIRTUAL CURRENCY FOR THE CONVENIENCE OF MONEY LAUNDERING..which very much made it so popular esp. among underground tycoons and taikos.....hehe
2017-11-18 18:22
I currently trade with Freshforex broker and have no problem at all. Excellent customer service and quick order execution. Your reviews about it?
2017-11-18 19:03
Many people tend to give a lot of bad name to it.
This is all about making money, central bank feel threaten and don't want to see it happens, they want control over money, when they have the control, they can control all human, they can continue to control this world.
2017-11-18 22:17
To all the retiree's out there... Mr.C, Paul and others... who are NOT financial savvy, my humble advice is for you to engage a proper fund manager to manage your funds in getting a return that is suitable to your risk preference.
Please go through the List of Capital Markets Services Licence holders for Fund Management issued by Securities Commission to ensure that your are given proper financial advice as to your requirements.
Personally, i use Phillip Capital to manage my retirement fund. Why you might ask? Becoz of Mr. Ang Kok Heng who is the Chief Investment Officer.. you can google him for his credentials.
2017-11-18 22:38
Posted by ramsyll > Nov 18, 2017 10:38 PM | Report Abuse
To all the retiree's out there... Mr.C, Paul and others... who are NOT financial savvy, my humble advice is for you to engage a proper fund manager to manage your funds in getting a return that is suitable to your risk preference.
Please go through the List of Capital Markets Services Licence holders for Fund Management issued by Securities Commission to ensure that your are given proper financial advice as to your requirements.
Personally, i use Phillip Capital to manage my retirement fund. Why you might ask? Becoz of Mr. Ang Kok Heng who is the Chief Investment Officer.. you can google him for his credentials.
I kind of agree with the above; if you have little knowledge and experience in investing, get a fund manager to do for you, preferably those with CMSRL.
But bear in mind fund managers and institutional investors make up the bulk of players in the market, and hence on average, a fund manager's performance will be average. In fact, an average fund manager will be likely to give you below average result because of fees. That is the nature of the industry.
Your costs determines your return in the long term. Know and understand your costs, which in my opinion, few appreciate this.
There are indeed some good fund managers out there who consistently outperform, but you can find out their performance through the funds they manage.
2017-11-19 09:33
Fundamental rule in investing is:
1. Don't invest using money that you CANNOT afford to lose.
2. Don't borrow money to invest.
I'm pretty sure retiree's can't afford to lose their money so as I said before, if you are NOT financial savvy, engage a fund manager to manage your fund. Yes, i can agree that some of these fund managers fee's are higher than those offered by egoistic free-lance unlicensed fund managers who offer such services BUT bear in mind, these fund managers hire professionals to do the work, professionals who are industry knowledgeable in analysing company performances viz-a-viz general market or special industry segment.
I'm a Certified Public Accountant, Chartered Accountant and I can say that I'm fairly good in fundamental investing by myself BUT I still engage a fund manager to manage the bulk of my fund based on my risk appetite. Trust me, fundamental investing takes a lot of time to research, and even then what you have the materials, they are public knowledge, and market price would have accounted for it, hence the gem is to do a little forecasting viz-a-viz company future, industry, segment etc.. there are thousands of companies listed on the Bursa.. good luck !!
Therefore, if you are a retiree, it's time to enjoy your retirement, enjoy your time with your loved ones, meet up with your old friends, go and play golf, travel while you still can and let the fund managers manage your hard-earned cannot afford to lose retirement fund !
Cheers !
2017-11-19 15:08
RUBBISH LOH...IF U R REALLY FINANCIAL SAVVY...WHY WASTE TIME & MONIES ON 3RD PARTY TO INVEST ON UR BEHALF LEH ??
U SHOULD HAVE CONFIDENCE TO DO IT YOURSELF LOH...!!
Posted by ramsyll > Nov 19, 2017 03:08 PM | Report Abuse
Fundamental rule in investing is:
1. Don't invest using money that you CANNOT afford to lose.
2. Don't borrow money to invest.
I'm pretty sure retiree's can't afford to lose their money so as I said before, if you are NOT financial savvy, engage a fund manager to manage your fund. Yes, i can agree that some of these fund managers fee's are higher than those offered by egoistic free-lance unlicensed fund managers who offer such services BUT bear in mind, these fund managers hire professionals to do the work, professionals who are industry knowledgeable in analysing company performances viz-a-viz general market or special industry segment.
I'm a Certified Public Accountant, Chartered Accountant and I can say that I'm fairly good in fundamental investing by myself BUT I still engage a fund manager to manage the bulk of my fund based on my risk appetite. Trust me, fundamental investing takes a lot of time to research, and even then what you have the materials, they are public knowledge, and market price would have accounted for it, hence the gem is to do a little forecasting viz-a-viz company future, industry, segment etc.. there are thousands of companies listed on the Bursa.. good luck !!
Therefore, if you are a retiree, it's time to enjoy your retirement, enjoy your time with your loved ones, meet up with your old friends, go and play golf, travel while you still can and let the fund managers manage your hard-earned cannot afford to lose retirement fund !
Cheers !
2017-11-19 17:07
DOW goes up from 18,000 to 24,000
Don't tell me it is difficult to make 30% gain from the market
Yet I can't even make one percent? Why make it so hard to make money? Then who make the money from the bull run?
2017-11-20 12:25
Many analyst suggest Zimbabwe is the reason Bitcoin become a good store of value, the more messed up the economy of a country, the higher demand for Bitcoin to their nation, Zimbabwe basically use Bitcoin for survival. What's next? May be Venezuela will be the next country to embrace Bitcoin? Bitcoin is used for money laundering? It may be true for Zimbabwe.
:)
2017-11-20 14:44
I knew right then and there that Bitcoin had the potential to change the world. My passion for Bitcoin was always framed by my ten years working in the financial industry. Many of us who lived through the 2008 crisis knew the financial system was dead. We knew it was corrupt, archaic and terminal, so many of us began bracing for what might come next. We did what we thought made sense at the time, which included buying precious metals like gold and silver given their historic track record of protecting wealth in periods of paradigm-shifting financial disruption. Others took more extreme measures to protect themselves from the end of the financial system, but a small group forward thinking geeks decided to do something much better. They decided to build an alternative.
2017-11-21 00:29
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
valuelurker
In the first place, dont go creating your own acronyms graham will be turning in his grave go bless his soul. secondly, everything you ever need on fundamental analysis is freely available on the internet, and there are free lunches, just not from you. so say so, and dont go around saying there isnt and proclaiming yourself to be saviour
2017-11-16 22:23