kcchongnz blog
Never be overconfident in investing kcchongnz
Following my last article on “Never buy any stock touted by anybody” in the link below,
https://klse.i3investor.com/blogs/kcchongnz/157367.jsp
This is another “Never” in investing in order not to lose money in the stock market.
Never to be overconfident in investing.
"In his book "Investment Titans," Jonathan Burton invited readers to ask themselves the following questions: Am I better than average in getting along with people, and am I a better-than-average driver?
If you are like the average person, you probably answered yes to both questions. In fact, studies typically find that about 90 percent of respondents answer positively to those types of questions. Obviously, 90 percent of the population cannot be better than average in getting along with others, and 90 percent of the population cannot be better-than-average drivers.
While, by definition, only half the people can be better than average at getting along with people and only half the people can be better-than-average drivers, most people believe they are above average. The logical conclusion we can draw is that a high percentage of those self-described "above average" individuals are in fact below average in those areas."
Just because you believe it doesn't mean it's true.
Confidence is a healthy and quality personal trait for our career and whatever we do. When we have confidence, it makes us feel good about ourselves, creating a positive framework with which to get through life's experiences. For example, if we are confident, we can do better in public speaking or networking.
In investing, I believe one can also do better too if he has the confidence to stand away from the crowd, provided he has the right experience, knowledge, the correct mindset and the proper and proven successful approach.
Unfortunately, being overconfident of our investment skills can lead to some disastrous results in investing in the stock market.
Over-confident investors/speculators think they know more than they do or they can interpret information and future events better. They often overestimated the probability of the success of their investment thesis. Some even cock sure of their success in their future investment just base on some gut feeling, or just simplistic business sense or rules.
In my experience, overconfidence can lead to some critical investment mistakes such as those below.
- All in, or Sailang
- Oblivious of risks
- Concentrated portfolio of just a handful, or just a couple of purportedly "sure-win" stocks.
- Leverage
Let’s take investing before and after the GE14 as an example.
Before May 9 2018, the day of casting of votes for the GE14, most analysts were predicting another win for Barisan National (BN). Some even thought BN would regain the two-thirds majority. Few people gave Pakatan Harapan (PH) any chance of winning. That was the common prediction as all the odds were stacking up against PH.
From the experience of GE13 five years ago, the stock market shot up and continued to go up after that. Many over-confident investors would have loaded up with a concentrated portfolio of the BN-linked stocks before GE14 in anticipation of the rally of those stocks after GE14.
Few doing the above were giving any thoughts on the risks involved; the slim chance that PH might spring a surprise and win the GE14.
It is a fact now that PH not only won the election but won in big enough majority. Many of those BN-linked stocks tanked and punters who bet big in those stocks lost huge amount of money.
What if those over-confident punters above also enticed to use margin finance, say 50% MF to bet all on two focus stocks of MyEg and George Kent, the two closely BN-linked and two of the best-performing stocks for the last few years?
After the GE14, both the stocks lost close to two thirds of their share price within two weeks! Over-confident punters would have lost all their money making leveraged bets on them, and still owing the banks a lot of money to be paid!
That is the peril of over-confident, combined with focus portfolio and the fatal use of leverage.
The above stocks were just some of the examples used. There were many other examples in this episode, whether they were BN-linked or not. I am sure similar things will happen to other stocks in the near and distance future.
Hence, beware of this dangerous cognitive bias of over-confidence in investing. Avoid combining it with portfolio concentration, and especially with leverage, and it will be good for one’s future investment outcome.
This doesn’t mean I am against confidence in investing. Go ahead, be confident. But be cautious about it and protect yourself by educating well in investing and doing your homework and being open to the possibility that you may be wrong.
Remember: it's not what you know that gets you in trouble—it's what you know for sure.
KC Chong at ckc13invest@gmail.com
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Discussions
7 people like this. Showing 36 of 36 comments
“Nevertheless, traders may look out for trading opportunities within the consumer and technology sectors on the back of zerorisation of the GST and weaker ringgit outlook, respectively,” it said.
http://www.theedgemarkets.com/article/klci-falls-092-indexlinked-blue-...
USDMYR 3.9825
https://www.bloomberg.com/quote/USDMYR:CUR
Change your investmentstrategy now. Index-linked stocks are not good buy now.
Buy undervalued technology stocks now.
2018-05-23 20:55
From the experience of GE13 five years ago, the stock market shot up and continued to go up after that. Many over-confident investors would have loaded up with a concentrated portfolio of the BN-linked stocks before GE14 in anticipation of the rally of those stocks after GE14.
COME ON, THIS IS CASINO TAISAI OR RUSSIAN ROULLETTE - A GAME OF CHANCE, NOT SHARE INVESTMENT LA.., KC
2018-05-23 21:58
PM Mahathir says to decide 'very soon' on whether to continue with Singapore-KL high speed rail project | http://www.klsescreener.com/v2/news/view/382459
2018-05-23 22:09
Malaysia’s credit rating threatened by GST removal http://www.theedgemarkets.com/article/malaysias-credit-rating-threatened-gst-removal
Long USDMYR
2018-05-23 22:31
MPI's stock price has been already high despite of a recent bad QR announcement. Why? Because outlook of Malaysian semiconductor stocks is good in the second half of the year!!
2018-05-23 23:37
there is a time for every thing in the investment world.
its all about the timing.
go and diversify to your heart's content if that satisfies you.
go and sailang every thing if that satisfies you, no risk no gain.
world is full of negative people.
that is why positive people are so exceptional.
2018-05-23 23:39
un-falsifiable assertions are of no use......
it all depends on the timing, the options, the choices, the characters, the experience, knowledge of the individual......no risk no gain........
2018-05-23 23:56
there is no post GE sell down....there is only some adjustments of crony shares......and bad results from Axiata.......
look at the currency market....anyone attacking the ringgit?
2018-05-24 00:06
Dear all,
To who interest on Post Ge14 selldown, you had miss the chance to join meeting with CP TEH last night.
But do not worry TEH will organize more meeting on Selldown
Thank you
http://klse.i3investor.com/blogs/cpteh/157963.jsp
Post GE14 : selldown
Wed, May 23, 2018 10:00 PM - 11:00 PM +08
Please join my meeting from your computer, tablet or smartphone.
https://global.gotomeeting.com/join/681700053
Talk tonight.
TEH
2018-05-24 05:35
Posted by Jon Choivo > May 23, 2018 08:53 PM | Report Abuse
Kcc, if you don't mind. What criticism would you have of my current top holding RCECAP. Not sure if you studied it before.
I looked at it long time ago and will have a look at it again. One problem with this kind of business is that lending money to people who are addicted to debts which they can't afford to pay has some clear and present risks too.
We can have a coffee together next month when I am back from overseas if you wish. Just email me.
2018-05-24 07:20
It doesn't mean we as investors do not take risks, but risks must be adequately compensated with a wide margin of safety.
2018-05-24 07:22
no use....
you are being overconfident with your margin of safety.....
even worse, it stops you from buying when it is time to buy...
and stops you from sellling when it is time to sell.
and margin of safety....don't make me laugh.
2018-05-24 10:00
truth be told, I don't need margin of safety....
but I feel very comfortable with my portfolio.
and I think there is nothing to worry about.
except for controversial shares, there is no better time for genuine investors.....so much stocks to pick from, spoil for choice.
for traders like me.....it is just perfect environment for me.
my advise...don't mix with negative people.
the habits of successful people do not include joining groups of negative people.
2018-05-24 10:33
Good on you.
Please share with us, with a comprehensive article, how you go about buying and selling shares. We are not interested on what shares you have, but tell us your process. Then only others can learn from you.
We are still waiting.
Posted by qqq3 > May 24, 2018 10:33 AM | Report Abuse
truth be told, I don't need margin of safety....
but I feel very comfortable with my portfolio.
and I think there is nothing to worry about.
except for controversial shares, there is no better time for genuine investors.....so much stocks to pick from, spoil for choice.
for traders like me.....it is just perfect environment for me.
my advise...don't mix with negative people.
2018-05-24 12:25
Let foreigners sell controversial shares, crony shares, Axiata which reported negative earnings and banking giant Maybank because they suddeny got cold feet.
But we are Malaysians, we know our companies and our situation better than the foreign fund managers.
Must not follow them blindly, we must exert our own views and stand by our own views.
except for controversial and political shares, I see this as great buying opportunity . Difficulties are temporary. Structural and political improvements are permanent.
the bearish mood will not last long. Window of opportunity not going to be long. Prompt response by the government and the Council is assured.
Clarifications are already on the way.
2018-05-24 22:08
I can share my portfolio...no problem
medium term investments
Jaks, Sendai, AeonCr, Vitrox, FLHB, MRCB, Gas Malaysia, DRB
short term trading......it arises every day.....with 10% target mostly because difficult to see big bull run.
2018-05-24 22:12
teach others? don't waste my time. In stock market everyone should travel their own lonely road.
2018-05-24 23:09
portfolio....in the name of diversity, my portfolio is not built up based on maths formulas. It would be silly to built up a portfolio based a mechanical rules and maths formulas. Might as well sailang one stock and choosing correctly.
my portfolio is based on shares/ companies that I like and have confidence. , intentionally with as many characteristics as possible.
other shares in my favorite page include....Air Asia, Harbor, Samchem,
2018-05-24 23:17
Posted by qqq3 > May 24, 2018 10:12 PM | Report Abuse
I can share my portfolio...no problem
medium term investments
Jaks, Sendai, AeonCr, Vitrox, FLHB, MRCB, Gas Malaysia, DRB
short term trading......it arises every day.....with 10% target mostly because difficult to see big bull run.
Anybody interested asked you to share your portfolio?
Anybody interested in your share your portfolio?
Is there any value in your statement?
You got so much time criticizing everyone (except one), why don't you write something more useful to share in an article, such as using Jaks or Sendai or whatever.
Then we can see how good you are.
I don't think anyone interested in what you own, or if you make money. I do not see any hint of it so far.
2018-05-25 05:42
kc
I am not like you...only good in talking about shares after the event...horse behind cannon.....
2018-05-25 07:03
Posted by qqq3 > May 24, 2018 11:09 PM | Report Abuse
teach others? don't waste my time. In stock market everyone should travel their own lonely road.
Has anyone asked you to teach him?
Anyone thinks that you can "teach"?
Can you write something tangible to show that you have that ability?
2018-05-25 07:28
kcchongnz > May 25, 2018 07:28 AM | Report Abuse
Can you write something tangible to show that you have that ability?
======
why would I do such a silly thing. I don't need any fee paying students.
I show my portfolio in the name of transparency...new era Malaysia.
unlike your horse behind cannon.
2018-05-25 14:22
buy with high margin of safety....I call that delusional, and worse, delusional confidence.
2018-05-25 15:58
Posted by qqq3 > May 25, 2018 02:22 PM | Report Abuse
kcchongnz > May 25, 2018 07:28 AM | Report Abuse
Can you write something tangible to show that you have that ability?
======
why would I do such a silly thing. I don't need any fee paying students.
ME: IT IS A FACT THAT ALL GOOD INVESTORS WRITE WELL. WRITING SOMETHING GOOD AND TANGIBLE T SHARE A SILLY THING?
WELL, I CAN'T IMAGINE THIS KIND OF MENTALITY.
I show my portfolio in the name of transparency...new era Malaysia.
unlike your horse behind cannon.
ME: WHO IS INTERESTED IN YOUR SHOW-OFF PORTFOLIO? CAN ANYONE GAIN LEARN ANYTHING FROM THERE? WHAT CONTRIBUTION IS THAT TO I3INVESTOR?
2018-05-25 19:52
Posted by qqq3 > May 25, 2018 03:58 PM | Report Abuse
buy with high margin of safety....I call that delusional, and worse, delusional confidence.
Your statement just blurted out from your mouth without going through your brain. In fact all statements from have been the same.
Why not write an article on this and give your argument why "margin of safety" is delusional, and what you mean by delusional confidence>
2018-05-25 19:58
kc
the real margin of safety comes from business sense and from truly understanding the business not from those maths formulas u teach........
2018-05-25 20:30
kc
the real margin of safety comes from business sense and from truly understanding the business not from those maths formulas u teach........
the real margin of safety come from understanding the investors as much as from understanding the investee.....know thyself.....know the psychology of the investor......
I think everyone who wants to do well have to travel their own lonely road to discover themselves.
your maths and you margin of safety is just an illusion...or worse an opiate for the masses.
2018-05-25 20:38
Posted by qqq3 > May 25, 2018 08:38 PM | Report Abuse
the real margin of safety comes from business sense and from truly understanding the business not from those maths formulas u teach........
ME:WOW, MARGIN OF SAFETY (MOS)COMES FROM BUSINESS SENSE??? HOW IS THAT SO? PLEASE ELABORATE.
the real margin of safety come from understanding the investors as much as from understanding the investee.....know thyself.....know the psychology of the investor......
ME: WOW, MOS COMES FROM UNDERSTAND THE INVESTORS? WHICH INVESTORS, THERE ARE COUNTLESS OF THEM?
WOW, FROM INVESTEE? WHAT INVESTEE?????
UNDERSTANDING THE INVESTEES? WTF IS THAT?
I think everyone who wants to do well have to travel their own lonely road to discover themselves.
ME: HOW??? WHY DO 90% OF THEM LOST MONEY?
your maths and you margin of safety is just an illusion...or worse an opiate for the masses.
ME: PLEASE ELABORATE.
2018-05-25 21:18
kc
the true intellectual giant walks the walk, walks his lonely path.
do u know this is the only industry teachers in their Proton Sagas teach people who comes in their Mercedes how to make money.....isn't that an irony?
Teachers so good, they should come in their Mercedes.
The truth....the truth is it is all a game, just a game. You can't learn how to be rich by mixing with negative people. You can learn how to be rich only by mixing with positive people. Its an attitude thing too.
By the chosen topic , you have shown yourself to be the negative sort....surely cannot teach how to be rich from stock market.
Back to your margin of safety, you cannot understand me because you do not use your brain, never even try, simple as that.....try using your brain for once, and ignore your maths for once.
2018-05-25 22:22
Malaysia will enter into a period of shrinking government Balance Sheet/ expenditures........Implication?
The implication is that business sense is even more important than before.......
All your previous maths and previous margins of safety is already obsolete.
Valuations of shares without understanding the business or without having business sense is misleading and some times downright dangerous.
margin of safety my foot.
2018-05-27 20:52
Posted by qqq3 > May 27, 2018 08:52 PM | Report Abuse
The implication is that business sense is even more important than before.......
All your previous maths and previous margins of safety is already obsolete.
Valuations of shares without understanding the business or without having business sense is misleading and some times downright dangerous.
margin of safety my foot.
Great statement, bravo.
But please elaborate what you mean by "business sense" in a well articulated article to show us you indeed have a "business sense", otherwise it is just "bullshit".
2018-05-28 05:39
Posted by qqq3 > May 25, 2018 10:22 PM | Report Abuse
do u know this is the only industry teachers in their Proton Sagas teach people who comes in their Mercedes how to make money.....isn't that an irony?
ME: YEAH KAH? I DIDN'T KNOW TEACHERS TEACH THOSE WHO COME IN THEIR MERCEDES. HOW YOU COME TO THIS CONCLUSION? PLEASE PROVIDE EXAMPLES, EVIDENCE ETC.
Teachers so good, they should come in their Mercedes.
ME: WHETHER SOMEONE IS GOOD OR NOT, IS THAT MEASURED BY THE CAR HE DRIVES?
IF SOMEONE DRIVES A MERCEDES, OR ROLLS-ROYCE, HE MUST BE A GOOD MAN?
WHAT KIND OF MENTALITY IS THAT?
The truth....the truth is it is all a game, just a game. You can't learn how to be rich by mixing with negative people. You can learn how to be rich only by mixing with positive people. Its an attitude thing too.
ME: INVESTING TO BUILD WEALTH A GAME?
By the chosen topic , you have shown yourself to be the negative sort....surely cannot teach how to be rich from stock market.
WE ARE DISCUSSING ABOUT INVESTING HERE.
AVOID TO BE OVERCONFIDENCE IN INVESTING A NEGATIVE MENTALITY?
AVOID LOSING BIG IN INVESTING A NEGATIVE MENTALITY?
Back to your margin of safety, you cannot understand me because you do not use your brain, never even try, simple as that.....try using your brain for once, and ignore your maths for once.
ME: HOW COULD ANYONE UNDERSTAND YOU BECAUSE YOUR STATEMENT BLURTED OUT WITHOUT GOING THROUGH SOMEONE WITHOUT A BRAIN IN THE FIRST PLACE.
2018-05-28 06:08
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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....
Jon Choivo
To be able to defend you position as hard as a zealot, and yet change your mind the instant new information come to light.
Being simultaneously confident enough to buy when everyone is selling, and yet humble enough to constantly check and recheck, and ask for contrary opinions.
Kcc, if you don't mind. What criticism would you have of my current top holding RCECAP. Not sure if you studied it before.
2018-05-23 20:53