TO TIME OR TO PICK

The most FAQ in investing. For VALUE INVESTOR, and LONG TERM INVESTOR (i.e.3-10 years)

"It is better to pick the right stock at the wrong time than to pick the right time for the wrong stock"

Naturally we pick stock when the intrinsic value is much higher than the price, and coincidently, lately with the drop of some blue chips due to "currency issue", "Fitch rating", "1MDB Debt", "Corruption in MARA" & etc.  So, we should pick up more DIGI, which also appears to be timing the market.  DIGI dropped from 6.40 to about 5.40, which fundamental does not change because of some negative external factors, become more attractive.  So, as a VALUE INVESTOR, if you buy, you appear to be timing the market but in reality, you are not.  You are just buying more value stock for your portfolio, period.

Please do not waste to much time over this century old myth about timing the market.  Buy when you see VALUE and when you have the money.  SELL, when everyone believe the price surpass the intrinsic value significantly.

PROCESS

Well, if you are ready with your "Value Stocks" list, during the recent "Greece issue" it provide more "value" to invest.  So, make sure you have a "wishing list" as your watchlist.  

DIGI may sound like a boring stock, for the last 10 years, its compounding return is about 28% p.a.  Even though I try not to over emphasize it, for the next 10 years, even if it can do HALF of what it did for the last 10 years, I believe the return is respectable.  You only need a capital gain of 10% (double in 7 years), and you will get the 5% DY yearly.  So, it is not too much to ask for.  Reason I like DIGI is not because its strong management, but looking at the landscape of telecommunication, I can see, more young people (like age 2-7 years old and 60-90 years old are using ipad and Malaysia internet penetration is only 40-50% vs South Korea, HK, Singapore, Taiwan which has rooms to grow.

FA vs TA and add in EA

Recently I attended an investment conference talk, which is very interesting when one of the fund manager, who besides using value investing method, she also mentioned that her mandate includes EA, Ethical Analaysis or Ethical investing.  The stocks picked must go through this screen test, which is more stringent than Syariah stocks.

Her portfolio for last 10 years is an annualised return of about 15%.  Not bad at all.

MARKET CRASH or Not (More importantly, are you ready or not)

Yes, one day it will.  When will it come, well, it is a trllion dollar questions.  Make sure you have hedged against that.  I personally believe the gap between the real economy and the financial markets (bonds and stocks) are pretty disconnected.  Market is pretty much driven by SENTIMENTS and LIQUIDITY, of course, many other factors involved besides earning.

When we look at the market whether it is high or low (compare with previous years or other regions), we must take into account the INTEREST RATE.  When the interest rate is very low, it is reasonable to assumed a higher market PE.  Say, today FD interest rate is 7%p.a., you wont expect the market PE is higher than when the FD interest is say 4% right?

My view is how the bigger picture will play out  (USA and EUROPE) is first, JUNK BONDS will collapse.  Then follow by BONDS and eventually STOCKS.  You may ask, shouldn't it be BONDS and STOCKS react in an opposite way?  Yes, that was before the QEs.

Some say, long way to go as Euro just started QE, China lately and Japan, keep adding in.  Perhaps. BUT market never follows a linear way, just like SENTIMENT.  It can change overnight, disregards the GDP or Earnings.

WHAT ARE YOU DOING NOW?

1.  Always update and get your watchlist ready.

2.  Hedge part of your exposure.

3.  Diversify out of RM

After you have don't everything within your wisdom, let the nature take its course.  If it is yours, eventually it will be yours.

Btw, you something more you like to learn, go to

www.sosfinancialplanning.blogspot.com