Posted by PlsGiveBonus > 2016-03-18 17:40 | Report Abuse

Use margin to buy ASB
Guarantee high return every year

Posted by stockraider > 2016-03-18 18:56 | Report Abuse

RAIDER SAYS THAT THE FOLLOWING COMMENT BY KC CHONG IS MISLEADING & ILL INFORMED LOH....!!
THE FAILURE OR LOSSES OF MOST INVESTORS IS DUE TO HIS WRONG STOCK PICKING AND HAD LITTLE TO DO WITH USING MARGIN OR NOT USING MARGIN LOH...!!

WHY RAIDER DEFEND USING MARGIN ??
RAIDER DEFEND BCOS, THE PERCEPTION THAT MARGIN IS BAD IS TOTALLY WRONG LOH...!!
MARGIN IS JUST A NEUTRAL INSTRUMENT LOH....!!
IT IS NEITHER GOOD....NOR IT IS BAD MAH....!!
IT MAGNIFY YOUR RETURN AND LOSSES LOH....!!

Secrets of Tycoons revealed part 3, real time cases study in Bursa kcchongnz
Author: kcchongnz | Publish date: Fri, 18 Mar 2016, 05:13 PM

In my recent article on “Does fundamental value investing (FA) have any predictive power?” In the link below here:
I talked about some academic research that demonstrate buying cheap in any form, be it be low P/B, P/E or P/CF (and also P/D) have been consistently over-performed than the broad markets and with less risk.
Then came these comments out of the blue in my thread talking something completely out of point:

Posted by lux88 > Mar 6, 2016 09:36 PM | Report Abuse http://cdn1.**********.com/cm/icon/trans16.gif
KC, what your stock performance for 2016?
U not even dare to compete for the ~ stock pick competition.
Even though OTB portfolio is doing weak now, at least he dare to take part and dare to admit mistake.
OTB i believe will be stronger and wiser now.

The above prompted me to look at some stocks I have written in the past 6 months and published in ********** to assess how they have been doing, and hence my article on “When Market Retreats, Pong Pong Pong Again” in the link below with the up to date return as shown in Table 1 in the Appendix.

At the close of the market this morning on 18th March 2016, the portfolio of 5 stocks written have an average return of 25.0% compared to the return of the broad market of just 0.6% this year. All stocks in the portfolio make double digits’ profit, with Scientex’s share price went up by a whopping 60.7%.

The great short-term return of the portfolio prompted me to think about what I have been arguing with someone in ********** about encouraging youngsters to use margin finance in investing to obtain accentuated return; why didn't I myself use margin financing to the limit to amplify my return?
If I take “margin finance to the limits” as propagated and borrow RM1m on top of my own capital of RM1m say, I would have made half a million Ringgit instead of just RM250000 using my own money, ignoring all transaction costs for the time being.

So if you are good in investing, or rather think you are good, why don’t you use other people’s money to make more money. Why are you so stupid? RAIDER SAYS THE AUTHOR KC HAS JUST RELEASED A PORTFOLIO CREATED IN 2013 THAT OUT PERFORM THE MARKET BY A WIDE MARGIN LOH....!! FOR EXAMPLE PRESTARIANG 1 COMPONENT MAKE A WHOPPING RETURN OF 400%.
JUST IMAGINE.....IF THIS PORTFOLIO IS LEVERAGE WITH MARGIN....THE RETURN COULD BE MAGNIFY SUBSTANTIALLY LOH..!!
THEREFORE USING MARGIN IS NOT DIFFICULT....BUT U MUST GET YOUR INVESTMENT MODEL RIGHT LOH..!!

Posted by stockraider > 2016-03-18 18:56 | Report Abuse

Let us re-read a couple of quotes from a well-known super investor and philosopher, Charles Munger, despite of what some people may claim,
“Investing is not easy, and anybody who thinks it is easy is stupid.” CORRECT RAIDER NEVER SAY IT IS EASY LOH...!!
U MUST MASTER THE INVESTMENT TECH B4 U CAN BE SUCCESSFUL LOH...!! THIS IS APPLICABLE TO MARGIN AS WELL AS NON MARGIN INVESTOR LOH...!!

"When you locate a bargain, you must ask, 'Why me, God? Why am I the only one who could find this bargain?'"
The above quote is a response of someone who said that since the interest rate for the margin finance is so low at 5%, and we are so sure of making so much more, why don’t we make use of other people’s money to make more? CORRECTLOH...IF U USE THE LAW PROBABILITY ....IF THE EXPECTED VALUE EXCEED 1....SAY THE EXPECTED VALUE 3...U SHOULD BUY LOH...!! WHATS MORE USE MARGIN TO BUY MORE....BCOS THE EXPECTED VALUE IS ^ HIGH LOH...!!

There is a dark side of using margin financing, very dark. Let us look at another portfolio, a random but I would say, a good portfolio of stocks as shown in Table 2 in the appendix, and its real time return now. THE PORTFOLIO GIVEN BY KC, IN THIS EXAMPLE HAS BEEN RIGGED LOH..!!
IT IS DESIGN TO FAIL THE MARGIN INVESTOR LOH....!!

IF THE AUTHOR KC...IS GENUINE TO USE AS A CASE STUDY....WHY DON HE USE HIS 2013 PORTFOLIO, THAT IS HAS BEEN SUCCESSFUL & SEE WHETHER IF USE MARGIN, WILL HE MEET WITH FAILURE LEH ??

Case study of margin finance on a Random Portfolio
“There’s no doubt that hard work, planning and persistence are essential for repeated success. But even the hardest workers and best decision makers among us will fail to succeed consistently without luck.” Howard Marks

I found a portfolio of stocks chosen at the end of year 2015 introduced in **********. Except for a couple of stocks such as V.S, which I have written numerous times, and a red chip of Xingguan, I would say all other stocks are good stocks. A few of those stocks, with their current share prices, actually meet all my criteria as written in the links below and hence I do own some of them too.

These are Latitude, Lii Hen, Canone, and Focus Lumber. Let us forget about the macro thingy such as whether exchange rate will continue to go up or down which is unknowable and unpredictable. Not only those companies are performing very well in their business recently with profit growth, high return on capitals, good cash flows, they are also selling very cheap in term of their earnings, firm level wise, or equity wise. Besides, they have quality assets and very healthy balance sheets too.

I am sure many have invested following a portfolio like this as those stocks picks are the more common ones in the stock pick challenge in 2016 in **********. I am also not surprised some youngsters, newbies and even old hands as well, after brain washed with so many advantages of margin finance to make amplified return, were lured by the remisiers, investment bankers and investment bloggers alike, have made use of margin finance.

But how have the stock prices and the portfolio return like recently?
AGAIN IF U HOLD THOSE HIGHLIGHTED BY KC....U WILL LOSE MONIES...IT DOES NOT MATTER U R A MARGIN HOLDERS OR CASH INVESTOR....BCOS MARKET TURN AGAINST U MAH....!!

BUT THE KEY....IS THAT THE MARGIN HOLDERS....WILL JUST HAVE TO SELL...ENOUGH SHARE....TO REACH AN EQUILIBRIUM LEVEL...THAT THE MARGIN CALL...IS NEUTRALIZE LOH....!!
A GOOD EXAMPLE....LIKE WHAT VETERAN KYY HAD DONE....AND HE FIND THE MARGIN CALL USEFUL AND BENEFICIAL...AND HE IS READY FOR THE NEXT UPTURN MAH....!!

Short-term return of the Random Portfolio
Table 2 in the Appendix shows the Random Portfolio has lost an average of 28.9%, in less than three months. Genetic and Xingguan have lost more than 50% in that very short period of time. If margin finance were used just to buy these two stocks, speculators would have lost everything, plus still owning banks some money.
USE MR KYY...INVESTMENT TECH....TO MANAGE YOUR MARGIN....IT MAKE ALOT OF BUSINESS SENSE LOH...!!

What would you do with such losses in your portfolio?
For me, no big deal. Exchange rate goes up and down. Stock market also goes up and down. Businesses go in cycles. With those good stocks I have mentioned above selling at such steal prices now, I just keep them or may buy more and then go and play golf. Someone says if you buy stocks at cheap price, or high margin of safety, don’t worry. Just keep them for long term and values will be realized later. YA MARGIN HOLDERS STILL CAN ADOPT THE SAME STRATEGY...HE JUST NEED TO SELL ENOUGH...TO NEUTRALIZE THE MARGIN CALL...BUT THE SAME TIME....HE STILL HOLD BIGGER EXPOSURE IN THOSE WONDERFUL STOCKS....BY USING MARGIN, COMPARE TO USING PURE CASH PURCHASE LOH...!!
WHEN MARKET RECOVER AND GROW ....HE WILL MAKE ALOT LOH....!!

Posted by stockraider > 2016-03-18 18:57 | Report Abuse

Posted by tksw > Mar 18, 2016 03:31 PM | Report Abuse http://cdn1.**********.com/cm/icon/trans16.gif
I shall patiently wait....
To recover the loss of 28.9% in a year and then more later is not to say easy, but it is doable if you have a good portfolio of stocks such as like that one in Table 2 and those portfolios in the links below.

What if one purchases those stocks using margin finance, to the limit of say 50% equity and 50% margin for the stocks in that Random Portfolio above? RAIDER ALREADY EXPLAIN....JUST SELL ENOUGH....TO NEUTRALIZE THE MARGIN CALL LOH...!!

The Peril of Margin Finance in the Short-term return
Table 3 in the Appendix shows the return of the Random Portfolio using margin finance to the limit.

It is assumed that RM1m is used for buying the stocks forming the Random Portfolio, and on top of that, another RM1m of margin is used. The set-up fee is assumed to be 1%, and interest rate for the margin finance is 5%, or 1.3% in three months, and a transaction cost of 1%. Incidentally, margin users pay much higher broker fee too. NOT TRUE LOH...THE MARGIN HOLDERS PAYS THE SAME BROKERAGE AS THE CASH BUYERS LOH...!!

The aim of using the margin finance is to hope for the outcome in scenario 1 as shown in Table 3 in the Appendix, the hope that the portfolio can make 50% return in a short time. With the low interest rate, the portfolio would have made an accentuated return of 963000, or a return of 96%! Even a return of 30% for the portfolio as shown in scenario would be wonderful enough with an accentuated return of 56.5%.

However, one can hope for whatever he wants, but he has no control over it, and the market can spring surprises, big ones too.
As at the close of the morning market on 18th March 2016, the Random Portfolio lost an average of 28.9% as shown in Table 2 in the Appendix, while the broad market has gone up by 1.3% during the same period. Every one of the ten stocks lost in double digit figures, with no exception. That is the complete opposite of the portfolio return as shown in Table 1, why a luck!
The total accentuated loss is RM607000, or 60.8% as shown in column 5 in Table 3. What are the results and actions to be taken by the investor, or the bank?
AS RAIDER SAYS...PLEASE DO NOT ACCEPT THE PORTFOLIO...DESIGN BY KC....IT IS DONE TO DISCREDIT THE MARGIN HOLDERS...TO PUT HIM IN A BAD LIGHT LOH...!!

TO PUT UP A BETTER PICTURE...RAIDER SUGGEST KC TO USE HIS 2013 PORTFOLIO....THAT HE SAYS VERY SUCCESSFUL...PUT IT ON MARGIN....SEE WHETHER IT WILL FAIL OR NOT LOH...!!

Posted by stockraider > 2016-03-18 18:58 | Report Abuse

Margin calls
Some investors may have encountered margin calls as their maintenance margin, i.e. equity/Market value of shares, has fallen below 40%. A margin call can be responded by depositing cash or marginable securities to the margin account or by liquidating existing stocks to get cash. AS KYY SAYS MARGIN CALL IS GOOD....RAIDER AGREE....ALSO LOG...!! IT IS HEALTHY TO GET MARGIN CALL...TO RECTIFY YOUR EXPOSURE TO EQUITY LOH....!!

One of the most important things to understand about margin calls is that your brokerage firm has discretion as to when you are required to increase the equity in your margin account. Whether or not you have been contacted by your broker, they can take immediate action to increase the equity in your account if they decide the equity is too low and is not commensurate with the risk of your account. This means they can immediately sell out whichever securities they choose, regardless of the financial obligations for you. That can turn things into a vicious circle, especially for the illiquid stocks; the more they sell, the lower the price of the stocks, the more losses one will encounter. NOT TRUE LOH...!! MARGIN CALL....DOES NOT CREATE A VICIOUS CIRCLE....IT ALLOW U...TO REDUCE YOUR LOSSES LOH....!! IT IS THOSE CASH HOLDERS....THAT SUFFER A BIGGER LOSSES....FOR HOLDING TO THEIR STOCK...DURING A SEVERE BEAR RAID LOH....!! A MARGIN HOLDERS WILL LOSE MUCH LESS MAH....BCOS OF EARLIER TRIGGER SELLING MAH.....!!
BTW...DON BE NAIVE....DO NOT ALLOW THE BANK TO SALE ON YOUR BEHALF....TAKE CONTROL SALE 1ST....B4 THE BANK SELL FOR U MAH.....!! THIS WHAT A PROFESSIONAL SHOULD DO LOH...!! JUST LIKE WHAT MR KYY HAS DONE LOH...!!

Depositing more cash will subject to more risks if there is further drop of the value of the portfolio, and hence the risk of more losses. In the short-term, it is hard to know when the bottom of the share price will be, even for some good shares.
Liquidating some positions, stocks which you supposed to have purchased with wide margin of safety (for the long-term) will result in permanent accentuated, and realized losses which is very hard to recover, taking into consideration of the long-term return of the stock market is less than 10% a year. RAIDER ALREADY SAYS JUST SALE ENOUGH TO NEUTRALIZE YOUR MARGIN CALL LOH...!! U STILL HOLD ENOUGH MARGIN OF SAFETY STOCK THAT WILL STILL BENEFIT FROM MARKET RECOVERY LATER LOH...!!
BCOS IT IS A MARGIN OF SAFETY STOCKS....IT SHOULD HAVE GOOD FUNDAMENTAL AND WILL BENEFIT FROM RECOVERY LOH...!!

What would you think a young investor using the margin finance above for this Random Portfolio and have lost 60.8% in less than three months will react? Do you think he has learned a good lesson, or never ever used margin finance again, or he think he has roughened up and he would be able to do better next time with more margin finance? WHEN BEAR MARKET RAID....THE CASH INVESTORS WILL HAVE LOSS A SUBSTANTIAL AMOUNT TOO....!!
AS I SAYS....THE MARKET SELLOFF IMPACT EVERYONE LOH....!!
IF U HAD MARGIN U HAS MORE OPTION.....TO BENEFIT FROM THE SUBSEQUENT MARKET UPTURN MAH....!!
DON FORGET MARGIN....MAGNIFY YOUR UPTURN GAIN MAH....!!

Posted by stockraider > 2016-03-18 18:59 | Report Abuse

Better in what sense, and how is that he will be better in his skills in dealing with this margin finance? I would think the loss of 60.8% in less than three months would have left such a terrible scar on him that he will never ever touch any share investment any more in the future! THE PORTFOLIO GIVEN BY KC RIGGED....EVEN IF IT IS NOT RIGGED....THE CASH HOLDERS WILL ALSO LOSE BIG ? THATS MEAN THE CASH EQUITY WILL HAVE BIG SCAR TOO ??
EVEN IF IT IS TRUE....THE MARGIN INVESTOR....WOULD HAVE SOLD DOWN....HIS POSITION....TO NEUTALIZE THE MARGIN CALL...AS A RESULT.....HIS LOSSES.....WILL BE FAR LESS THAN THE 60.8% QUOTED BY KC LOH...!!
IN CERTAIN CIRCUMSTANCES HIS LOSSES....MAY EVEN LESSER THAN THE CASH INVESTOR LOH....!!
THIS BCOS MARGIN INVESTOR ARE FORCE TO BE DISCIPLINE COMPARE TO CASH INVESTOR LOH....!!

Some margin account may not have triggered margin call yet with the 60.8% loss of the Random Portfolio. Some investors, especially those loaded ones, may have the “special privilege” that margin calls will only be triggered if the maintenance margin is less at 30%. So they are not that worried, or is it? SHARE FALL WORRY ....EVERYBODY LOH...!! NOT ONLY MARGIN INVESTOR LOH...!!
THE ONLY SOLUTION IS TO SELL ENOUGH TO NEUTALIZE YOUR MISERY AT THE SAME TIME HAD ENOUGH OF EQUITY TO PARTICIPATE FOR THE NEXT UPTURN LOH...!!

I have personally seen a portfolio, even after depositing a huge amount of securities as additional collateral, still suffered a heavy loss of more than 70%, and after that the market still continued its sharp fall. That is exactly the problem; the more privilege you are, the more risks you are subject to. THATS WHY RAIDER....DEPOSITING MORE COLLATERAL IS NOT THE ANSWER LOH...!!
BUT ANYHOW....IF MARKET CAN FALL 70%....DON U THINK....THE CASH INVESTOR ALSO SUFFER HEAVY TOO ??

Conclusions
“The most dramatic way we protect ourselves is we don’t use leverage. We believe almost anything can happen in financial markets… [so] even smart people can get clobbered with leverage. It’s the one thing that can prevent you from playing out your hand.” Warren Buffett . ACTUALLY THE BEST WAY....TO PROTECT OURSELVES....IS DON BUY EQUITY ?? BUT THIS APPLY TO VERT RISK ADVERSE INVESTOR LOH....!!
BUT THE ABOVE SCENARIO IS NOT A GOOD SOLUTION BCOS IN THE LONG RUN THEY WILL LOSE OUT BCOS EQUITY WILL ALWAYS OUTPERFORM LOH...!!

THEREFORE....WE SHOULD INVEST IN EQUITY LOH....!!
BUT TO USE A MARGIN OR NOT TO USE A MARGIN IS AN OPTION FOR INVESTOR LOH....!!
FOR EQUITY INVESTOR....HE FEAR...MAJOR MARKET SELLOFF....IF THAT HAPPEN HE WILL HAVE A BIG SETBACK....FOR BOTH CASH EQUITY INVESTOR AND MARGIN INVESTOR LOH...!!

Investing is supposed to be building long-term wealth in a stress free manner such that you can focus on the important things in life, such as your career and family. The stock market, economy, exchange rate, interest rate, and even individual company business is unknowable and unpredictable in the future, especially in the short-term.
CORRECTLOH....U SHOULD INTELLIGENTLY USE ALL THE TOOLS TO YOUR DISPOSAL LOH....TO BENEFIT FOR LONG TERM INCREASING EQUITY GAIN LOH....!!

“In the short-term, the market is a voting machine, but in the long term it is a weighing machine.”
In the short term, market or individual stock prices can tank. Even good stocks can go down in prices sharply too, even though the broad market is still okay as you have seen.
DON BARK AT THE WRONG TREE LOH...!! WHETHER U R CASH EQUITY INVESTOR OR MARGIN INVESTOR....THE STOCK PRICE CAN TANKED TOO....!!
AS LONG AS THE MARGIN OF SAFETY STOCK ALWAYS OUTPERFORM IN THE LONG RUN....U HAVE A SUCCESSFUL....WEALTH GENERATION MODEL....WHETHER U USE MARGIN OR USE CASH TO INVEST LOH...!!

Margin calls can be a stressful experience with serious financial implications. Your brokerage firm has the right to sell shares you own at any time to increase your equity. This can be done with no written notice and without regard to any consequences for you.
ON THE OTHERHAND...MARGIN CALL...IS USEFUL...IT LIMIT YOUR LOSSES....AND ALERT U ACTION NEED TO BE TAKEN...TO PROTECT YOURSELF LOH....!! MARGIN CALL IS LIKE A GOAL KEEPER OR INNER VOICE ADVISER LOH...!!

PLEASE NOTE THAT MARGIN....DOES NOT AFFECT....YOU... BCOS IT IS NEUTRAL LOH...!!
IT IS YOUR INVESTMENT TECHNIQUE.....THAT IS IMPORTANT LOH.....!!

A SUCCESSFUL WEALTH INVESTMENT TECHNIQUE....WILL ENHANCE YOUR WEALTH IN THE LONG RUN....WHETHER U USE MARGIN OR NOT LOH....!!

DO NOT BE MISLEAD....THAT USE MARGIN IS ALL THAT BAD .....!!

Posted by Probability > 2016-03-18 19:33 | Report Abuse

I love debates & discussions as it forces you to think and re-evaluate your existing assumption & conditioning which had been imposed by your past knowledge you had acquired....

however, 90% of all debates don't even define what exactly is the scope of their debate...and pour words like heavy rain...and you may get lost and forget your original destination - objective.

Posted by Probability > 2016-03-18 20:07 | Report Abuse

If I understand correctly, the discussion is about ‘should youngsters be encouraged to use Margin Finance ?’ …perhaps it can be simplified with the objective as per below Question:

(1) If you have two identical twins A & B who are Business graduates aged 25 and now they are earning a monthly income of say 5K with an expected salary hike of 5 per annum till they are 60 years old. And both are planning to make money from Stock market as much as possible till they retire..

(2) A start using Margin financing at the age of 26 (at young age) and B starts using at the age 35 (more experienced age).

Question is:
Among the two, A&B, who would have acquired the highest amount of Savings by the time they retire? Since we can't talk about future with certainty...we have to ask who (A or B) has a higher odds of making more money by the time they retire? A&B should a general median sample representing the average people - as its pointless to talk about special extraordinary events or special skilled people here.

One way to approach this is just like how we evaluate a business Value using DCF. Starting with purely Equity funding and as the Invested Capital keep increasing due to Re-investments, leverage had to be utilized using Debts to Fund. We have to assume that the business has its ROIC or more accurately its RONIC with a certain uncertainty on its Return Value….possibly going below the Margin Finance interest rate.

For A & B…from the age 26 to 35 obviously their RONIC (their investment returns are not going to be as good as from the age of 35 to 45 or even more so compared to 45 to 60.

We need to see the implication on the Overall final Value between A & B when A started to increase his Invested Capital almost double that of B but at phase of his life where there was a Huge Risk of running into investments with ROIC much lower than the Cost of the Debt (COD). If the odds are very high for the ROIC to be lower than COD….especially when the Invested Capital is not the real business assets but the Stock market….perhaps A will very likely be poorer than B by the time they are both 60.

I have not done the calculation using a certain probability on ROIC with time to evaluate…..but…Since its stock market…I rather not use Debt till I retire.

Posted by stockraider > 2016-03-18 20:52 | Report Abuse

If I understand correctly, the discussion is about ‘should youngsters be encouraged to use Margin Finance ?’ …perhaps it can be simplified with the objective as per below Question:

(1) If you have two identical twins A & B who are Business graduates aged 25 and now they are earning a monthly income of say 5K with an expected salary hike of 5 per annum till they are 60 years old. And both are planning to make money from Stock market as much as possible till they retire..

(2) A start using Margin financing at the age of 26 (at young age) and B starts using at the age 35 (more experienced age).

RAIDER SAYS WHETHER U R 21 OLD OR 40 YRS OLD SHOULD U USE MARGIN LEH ?
ANSWER IT ALL DEPENDS.....BUT THE INVESTORS SHOULD BE GIVEN THE CORRECT BALANCE VIEW. THAT MARGIN IS NOT THAT BAD OR GOOD....IT IS A MAGNIFYING NEUTRAL TOOLS.
WHETHER THEY USE OR NOT TO USE....THEY THEMSELVES NEED TO DECIDE....AFTER EXAMINING ALL FACTORS LOH...!!

Question is:
Among the two, A&B, who would have acquired the highest amount of Savings by the time they retire? Since we can't talk about future with certainty...we have to ask who (A or B) has a higher odds of making more money by the time they retire? A&B should a general median sample representing the average people - as its pointless to talk about special extraordinary events or special skilled people here.
OF COURSE IF U R A SUCCESSFUL INVESTOR....YOUR WEALTH WILL BE HIGHER IF U ....USE MARGIN....BCOS IT MAGNIFY UR GAIN LOH....!!

ON THE OTHERHAND....IF U R A LOUSY INVESTOR...U SHOULD NOT USE MARGIN AT ALL LOH...!! TO BE BLUNT,IN FACT U SHOULD NOT INVEST AT ALL....BCOS YOUR MAKE UP...IS NOT SUITABLE FOR INVESTMENT MAH...!!

One way to approach this is just like how we evaluate a business Value using DCF. Starting with purely Equity funding and as the Invested Capital keep increasing due to Re-investments, leverage had to be utilized using Debts to Fund. We have to assume that the business has its ROIC or more accurately its RONIC with a certain uncertainty on its Return Value….possibly going below the Margin Finance interest rate. THATS WHY RAIDER SAYS...TO USE MARGIN OR NOT....DEPEND ON HOW SUCCESSFUL U R AS AN INVESTOR LOH....!!

GIVEN THE LOUSY INVESTOR SHOULD NOT INVEST AT ALL....!!

THEREFORE GENERALLY ALL GOOD INVESTOR...SHOULD BE ENCOURAGE TO USE MARGIN....BCOS THIS WILL MAGNIFY IS GAIN LOH...!!

For A & B…from the age 26 to 35 obviously their RONIC (their investment returns are not going to be as good as from the age of 35 to 45 or even more so compared to 45 to 60.
DOES IT MATTER YOUR AGE ? A YOUNG PERSON SET UP TO BE A GOOD INVESTOR...SHOULD BE ENCOURAGE TO USE MARGIN....EARLIER LOH!!..THIS ALLOW SOME TRIAL & ERROR WHEN THEY ARE YOUNG LOH....!!
OLD FELLOW....RAIDER LESS ENCOURAGE....THEM TO USE MARGIN....IF THEY HAVE NOT USE MARGIN AT ALL PREVIOUSLY LOH...!!
BUT.THIS REASONING IS NOT FINAL....IT DEPEND ON THE INVESTOR SUSTAINABLE SUCCESSFUL INVESTMENT TRACK RECORD MAH....!!

We need to see the implication on the Overall final Value between A & B when A started to increase his Invested Capital almost double that of B but at phase of his life where there was a Huge Risk of running into investments with ROIC much lower than the Cost of the Debt (COD). If the odds are very high for the ROIC to be lower than COD….especially when the Invested Capital is not the real business assets but the Stock market….perhaps A will very likely be poorer than B by the time they are both 60.
WHEN COST OF DEBTS....THE NATURAL TENDENCY TO USE MORE MARGIN...BCOS THE HURDLE RATE IS LOW MAH...!!

I have not done the calculation using a certain probability on ROIC with time to evaluate…..but…Since its stock market…I rather not use Debt till I retire.

Posted by Pakcik Saham > 2016-03-18 21:15 | Report Abuse

Good share kcchongnz

Posted by odie88 > 2016-03-18 21:26 | Report Abuse

Using margin to invest is a topic of risk management, telling one not to use margin is an advice for newbies and many. But not for everyone, especially who completely know their risk management. A tycoon might call up a margin limit up to 100million but he is capable of, since he might have 1billion. It's just a leverage, and he might see some advantages from it. I personally think it's just a kind of tool... Might be handy but might be hurt yourself if you really can't handle it since the facility given is not for free..

Posted by Probability > 2016-03-18 21:37 | Report Abuse

Question is:
Among the two, A&B, who would have acquired the highest amount of Savings by the time they retire? Since we can't talk about future with certainty...we have to ask who (A or B) has a higher odds of making more money by the time they retire? A&B should a general median sample representing the average people - as its pointless to talk about special extraordinary events or special skilled people here.

OF COURSE IF U R A SUCCESSFUL INVESTOR....YOUR WEALTH WILL BE HIGHER IF U ....USE MARGIN....BCOS IT MAGNIFY UR GAIN LOH....!!

ON THE OTHERHAND....IF U R A LOUSY INVESTOR...U SHOULD NOT USE MARGIN AT ALL LOH...!! TO BE BLUNT,IN FACT U SHOULD NOT INVEST AT ALL....BCOS YOUR MAKE UP...IS NOT SUITABLE FOR INVESTMENT MAH...!!

ok...guess that already given answer to this topic.

I agree on that...and I am of the opinion most of the youngsters who haven't have good experience are a LOUSY investor.

Posted by Desa20201956 > 2016-03-18 21:39 | Report Abuse

I no energy to read....

but I love this raider guy.

Don't have anyone have a monopoly on such a yin yang topic as the stockmarket....in the stockmarket, where there is yin, there will be yang just around the corner.

Posted by paperplane2016 > 2016-03-18 23:29 | Report Abuse

Desa, see airasia? Since u got few calls and airasia major, congrats.
Now, look at MMC now by Che Khalid.
Read rhb rpt

Posted by paperplane2016 > 2016-03-18 23:30 | Report Abuse

I agree with raider loh, kc is bias. How u call those pick are random? It is just picked based on certain perception.

Posted by curious2 > 2016-03-18 23:33 | Report Abuse

Why KC never talk about AirAsia?

Posted by paperplane2016 > Mar 18, 2016 11:30 PM | Report Abuse
I agree with raider loh, kc is bias. How u call those pick are random? It is just picked based on certain perception.

Posted by curious2 > 2016-03-18 23:39 | Report Abuse

Agree with both paperplane2016 and raider. If follow KC only 10-20 stocks can buy the rest cannot.

Posted by paperplane2016 > Mar 18, 2016 11:30 PM | Report Abuse
I agree with raider loh, kc is bias. How u call those pick are random? It is just picked based on certain perception.

Posted by paperplane2016 > 2016-03-18 23:55 | Report Abuse

I have no idea......random? How.

Posted by kcchongnz > 2016-03-19 00:05 | Report Abuse

Posted by stockraider > Mar 18, 2016 06:56 PM | Report Abuse
THE PORTFOLIO GIVEN BY KC, IN THIS EXAMPLE HAS BEEN RIGGED LOH..!!
IT IS DESIGN TO FAIL THE MARGIN INVESTOR LOH....!!

IF THE AUTHOR KC...IS GENUINE TO USE AS A CASE STUDY....WHY DON HE USE HIS 2013 PORTFOLIO, THAT IS HAS BEEN SUCCESSFUL & SEE WHETHER IF USE MARGIN, WILL HE MEET WITH FAILURE LEH ??


The portfolio was published in public forums on 26th December 2016. It is publicly available information with the prices at the time of publish.

Why is the “example has been rigged loh”? Who “designed to fail the margin investor loh”?

Yes, my 2013 portfolios, two of them made about 130%. However, the test of the survival of margin finance is not to choose a successful portfolio. Any portfolio using margin finance must be able to survive any market condition, especially in the short term, and a six-sigma market distress condition. And we aren’t even any time near to that yet. In fact, the broad market was up but that portfolio already suffered a big setback of 28.9%. How brutal it will be if there is a sharp drop of the market like the recent Shanghai Stock Exchange, that of 2008, 2001, 1998 etc.?

Posted by kcchongnz > 2016-03-19 00:07 | Report Abuse

Posted by paperplane2016 > Mar 18, 2016 11:30 PM | Report Abuse

I agree with raider loh, kc is bias. How u call those pick are random? It is just picked based on certain perception.


Me: Where did I say those picks are random?

I said i choose a random portfolio.

Posted by kcchongnz > 2016-03-19 00:11 | Report Abuse

Posted by curious2 > Mar 18, 2016 11:33 PM | Report Abuse
Why KC never talk about AirAsia?
Agree with both paperplane2016 and raider. If follow KC only 10-20 stocks can buy the rest cannot.


Me: I am triple curious about your above statements.

Shy must I talk about Air Asia?

Where did I say “only 10-20 stocks can buy the rest cannot”.

Do yu have any idea how many companies are listed in Bursa?

Posted by Desa20201956 > 2016-03-19 01:36 | Report Abuse

I got no AA but AAX is my largest position at around 25 sec.
I bot and sold AAX at around 20 sen previously , held for 4 months from August to Dec.
==============================

paperplane2016 Desa, see airasia? Since u got few calls and airasia major, congrats.
Now, look at MMC now by Che Khalid.
Read rhb rpt

Posted by Desa20201956 > 2016-03-19 01:49 | Report Abuse

risk management......risk management is done by adjusting the amount bot and the diversification appropriate at the moment not by avoiding margin all together.

no ever become a tycoon without facing risks.

Posted by paperplane2016 > 2016-03-19 03:21 | Report Abuse

How we can know if tht random portfolio is chosen random? And not without bias to show how great your portfolio is in comparison?

Posted by kcchongnz > 2016-03-19 12:08 | Report Abuse

Posted by paperplane2016 > Mar 19, 2016 03:21 AM | Report Abuse

How we can know if tht random portfolio is chosen random? And not without bias to show how great your portfolio is in comparison?


You got to read and understand the article rather than making so many presumptions.

Where have I compared my the return of my portfolio and the Random Portfolio?

Do you understand the gist of the article? And what message is it trying convey?

Whether the portfolio is randomly chosen or not, it doesn't matter. it is the perfect portfolio to use to convey an extremely important maxim is investing; Never follow anyone's advice to buy stocks, whether good or bad, with margin finance.

That perfect portfolio used shows that margin calls were effected with the sharp drop in prices of the portfolio, some of them even very good stocks,even though the overall market has gone up.

Google and read more about the serious consequences of margin calls. Or google the "advantages", and "benefits" of margin calls if you like, and see if you can find any.

Posted by Kian Leong Lim > 2016-03-19 13:35 | Report Abuse

Theory is what, since everything happens in random, how does theory predicts what is random. Keep a lot of cash, cash flow is King, try to use margin buying only in very evitable situations. Cash is King. I rather spend the money in night-club than throw money away for no reason. Cash is King, go to night-call, have sssss, cash is king.

Posted by GODinvest > 2016-03-19 14:51 | Report Abuse

Hi Kc , I go bursamalaysia website see the ECS chart price , why no same ? Got adjust? Ecs no right issue or bonus issue also . I remenber 2015 high is 1.78 low is 106 ... But i see the bursamalaysia ECS chart is high 1.21 low 0.88 , you know wat happen? Or bursamalaysia website error?

Posted by pisanggoreng > 2016-03-19 15:52 | Report Abuse

to a gambler, if he didn't lose until he need to chop off his fingers , he will never believe gambling is bad

Posted by Probability > 2016-03-19 15:58 | Report Abuse

it needs an exceptional Debtor to beat the Creditor...
even more so to beat the Margin Financer..

12-Year Old Child Reveals One of the Best Kept Secrets in the World

https://www.youtube.com/watch?v=JHQOX8EVNmE

Posted by pisanggoreng > 2016-03-19 16:03 | Report Abuse

stockraider and his gang are gamblers, KC is not a gambler,

stockraider gang beleives in his skill and life long good luck

KC believe in value, less in good luck

if you want fast money, then join stockraider

if you want safe money, then join KC

the choice is yours


if you do not how to choose, then choose a pisang goreng

Posted by pisanggoreng > 2016-03-19 16:10 | Report Abuse

stockraider,

why paste so much what other people had said
you think the readers here has no memory what they have read.
just write what you want to say, learn to be more straight forward in you expression
one simple personal request from me,

don't use too much loh,loh,leh, leh,...

i feel not necessary , it doesn't make your speech sounds more like an "old-hand or high-hand"

Posted by 3iii > 2016-03-19 16:15 | Report Abuse

raider is using margin trading.

He uses margin because whatever cash he has was not enough for his investing.

He is beholden to his tukang titik who provided him with margin financing.

He cannot badmouth margin trading as this would be bad for his industry, which his friends are closely into.

He is a good chap to observe but not to follow unthinkingly.

The stocks he likes or bought, he will defend these as having a margin of safety.

I have yet to comprehend how he gets his margin of safety after so many years observing his trades. :-)

Posted by pisanggoreng > 2016-03-19 16:16 | Report Abuse

KC,
thank you very much, at one point I nearly use MF
luckily I read you table 3
I noticed,If I use mf and do not know how to cut loss fast
30% loss in the portfolio ,already enough power to send me to Holand.
how can I not grateful to you

Posted by Mr. M > 2016-03-19 16:26 | Report Abuse

KC, thanks for sharing. 1 question. What's P/D ratio referring to?

Posted by yeohhh > 2016-03-19 17:27 | Report Abuse

You are right

Posted by stockmanmy > 2016-03-19 18:15 | Report Abuse

goreng, 3iii, m, all,


risk management......risk management is done by adjusting the amount bot and the diversification appropriate at the moment not by avoiding margin all together.

no one ever become a tycoon without facing risks.

face up to risk like a man

what to die, die with honor.

kc do a model margin portfolio and immediate starts with losing money.

the opposite is a margin that starts to make money immediately and equity start accumulating and growing immediately

Posted by kcchongnz > 2016-03-20 01:02 | Report Abuse

Posted by pisanggoreng > Mar 19, 2016 04:16 PM | Report Abuse
KC,
thank you very much, at one point I nearly use MF
luckily I read you table 3
I noticed,If I use mf and do not know how to cut loss fast
30% loss in the portfolio ,already enough power to send me to Holand.
how can I not grateful to you

Pisang Goreng,Your last sentence makes my day.

It now dawned to me that using margin is like an addiction. One can't pull himself out of the deep black pit.

But bear in mind that, go ahead with your addiction. do whatever you like. This is a free world.

But when you starts to preach an addiction, and encourage the young ones to get into this addiction, you are doing a great disservice to the society.

Posted by kcchongnz > 2016-03-20 01:10 | Report Abuse

Posted by Mr. M > Mar 19, 2016 04:26 PM | Report Abuse

KC, thanks for sharing. 1 question. What's P/D ratio referring to?

Price to dividend, the flip side of dividend yield.

Posted by kcchongnz > 2016-03-20 01:13 | Report Abuse

Posted by stockmanmy > Mar 19, 2016 06:15 PM | Report Abuse

risk management......risk management is done by adjusting the amount bot and the diversification appropriate at the moment not by avoiding margin all together.

ME: YOU ARE RIGHT. AVOIDING MARGIN FINANCE IS NOT A RISK MANAGEMENT. NOBODY SAYS STUPID THING LIKE THAT.

INSTEAD USING MARGIN FINANCE IS GAMBLING.

BUT I DON'T REALLY KNOW WHAT YOU ARE SAYING ABOUT RISK MANAGEMENT.

no one ever become a tycoon without facing risks.

YOU MAY BE RIGHT TOO HERE. BUT FOR EVERY ASPIRING TO BECOME A TYCOON, ONE SUCCEEDED AND 100 GET INTO BANKRUPTCY.

face up to risk like a man

what to die, die with honor.

ME: IS THAT HOW YOU LOOK AT INVESTING? GOOD LUCK TO YOU.

kc do a model margin portfolio and immediate starts with losing money.

ME; THAT IS NOT MY "MODEL PORTFOLIO". PLEASE GO AND CHECK YOURSELF WHOSE PORTFOLIO IS THAT. IT IS ALL OVER THE INTERNET.

the opposite is a margin that starts to make money immediately and equity start accumulating and growing immediately

PLEASE PUT UP ONE PORTFOLIO IN I3INVESTOR. A YEAR OR SO DOWN THE ROAD, THEN ONLY CLAIM WHATEVER YOU HAVE BEEN CLAIMING.

Posted by stockraider > 2016-03-20 02:25 | Report Abuse

Please read this very important statement b4 u decide to use margin loh...!!

RAIDER SAYS WHETHER U R 21 OLD OR 40 YRS OLD SHOULD U USE MARGIN LEH ?
ANSWER IT ALL DEPENDS.....BUT THE INVESTORS SHOULD BE GIVEN THE CORRECT BALANCE VIEW. THAT MARGIN IS NOT THAT BAD OR GOOD....IT IS A MAGNIFYING NEUTRAL TOOLS.
WHETHER THEY USE OR NOT TO USE....THEY THEMSELVES NEED TO DECIDE....AFTER EXAMINING ALL FACTORS LOH...!!

Question is:
Among the two, A&B, who would have acquired the highest amount of Savings by the time they retire? Since we can't talk about future with certainty...we have to ask who (A or B) has a higher odds of making more money by the time they retire? A&B should a general median sample representing the average people - as its pointless to talk about special extraordinary events or special skilled people here.
OF COURSE IF U R A SUCCESSFUL INVESTOR....YOUR WEALTH WILL BE HIGHER IF U ....USE MARGIN....BCOS IT MAGNIFY UR GAIN LOH....!!

ON THE OTHERHAND....IF U R A LOUSY INVESTOR...U SHOULD NOT USE MARGIN AT ALL LOH...!! TO BE BLUNT,IN FACT U SHOULD NOT INVEST AT ALL....BCOS YOUR MAKE UP...IS NOT SUITABLE FOR INVESTMENT MAH...!!

One way to approach this is just like how we evaluate a business Value using DCF. Starting with purely Equity funding and as the Invested Capital keep increasing due to Re-investments, leverage had to be utilized using Debts to Fund. We have to assume that the business has its ROIC or more accurately its RONIC with a certain uncertainty on its Return Value….possibly going below the Margin Finance interest rate. THATS WHY RAIDER SAYS...TO USE MARGIN OR NOT....DEPEND ON HOW SUCCESSFUL U R AS AN INVESTOR LOH....!!

GIVEN THE ABOVE CONCLUSION, A LOUSY INVESTOR SHOULD NOT INVEST AT ALL....!!

THEREFORE GENERALLY ALL GOOD INVESTOR...SHOULD BE ENCOURAGE TO USE MARGIN....BCOS THIS WILL MAGNIFY IS GAIN LOH...!!

Therefore if KC design a portfolio....for losers....!!
DON U THINK THE LOSERS SHOULD NOT EVEN INVEST IN THE 1ST PLACE ?

MARGIN SHOULD BE USE BY WINNERS AND NOT LOSERS MAH....!!
BCOS THE WINNER SUCCESS WILL BE MAGNIFY LOH
ON THE OTHERHAND A LOSER LOSSES WILL BE MAGNIFY TOO LOH...!!

PLEASE GET THE FACT RIGHT LOH....!!

Posted by stockraider > 2016-03-20 02:50 | Report Abuse

Posted by pisanggoreng > Mar 19, 2016 04:03 PM | Report Abuse

stockraider and his gang are gamblers, KC is not a gambler,
PLEASE NOTE THE FOUNDATION OF INVESTMENT COME FROM THE THEORY OF GAMBLING MAH....!!
A CONSISTENT SUCCESSFUL INVESTOR....MANAGE POSITIVE EXPECTED VALUE...WHEREAS GAMBLERS MANAGE NEGATIVE EXPECTED VALUE LOH...!!
WHAT IS NEGATIVE EXPECTED VALUE ?
IF U INVEST IN 4 EKOR....THERE ARE 10000 NUMBERS....!!
IF INVEST RM 1 IN EVERY NUMBER IT WILL COST U RM 10000 , BUT YOUR PRIZE IS ABOUT RM 6500 = THEREFORE UR NEGATIVE EXPECTED VALUE IS RM 3500 LOH....!!

AN EXAMPLE A POSITIVE EXPECTED VALUE....SAY THERE ARE 3 BOX...1 BOX HAVE RM 5000, ANOTHER HAVE RM 3000 AND THE 3RD BOX HAS ZERO CASH.
U CAN BUY ANY OF THE BOX FOR RM 2000 PER BOX.
SHOULD U INVEST ? THE ANSWER IS YES.....BCOS IT HAS POSITIVE EXPECTED VALUE LOH....!!
SHOULD U BORROW AND INVEST IN THE BOX ? THE ANSWER IS AGAIN YES...BCOS OF POSITIVE EXPECTED VALUE MAH...!!

stockraider gang beleives in his skill and life long good luck .
THIS IS NOT LUCK...BCOS WE DEAL WITH POSITIVE EXPECTED VALUE...USING MARGIN OF SAFETY MAH...!!

KC believe in value, less in good luck. USE KC RAIDER AGREE THAT KC BELIEVE IN VALUE...BUT HE HAS FAILED TO COMPREHEND THAT USING MARGIN IS VIABLE TOO....WHEN U DEAL WITH POSITIVE EXPECTED VALUE MAH...!!

if you want fast money, then join stockraider...RAIDER IS NO GAMBLER..BUT RAIDER ....KNOW HOW TO USE....ADDITIONAL INSTRUMENT (MARGIN)....WHEN THERE IS OPPORTUNITY TO TAKE ADVANTAGE OF POSITIVE EXPECTED VALUE LOH...!!

if you want safe money, then join KC...IF U STAY WITH CASH...RAIDER SAY FINE....!!
BUT AGAIN...PLEASE DO NOT MISLEAD PEOPLE...THAT MARGIN IS GAMBLING LOH...!!

the choice is yours...RAIDER AGREE FREE CHOICE WITH ALL THE FACTS LAYDOWN....!!


if you do not how to choose, then choose a pisang goreng..IT IS FINE IF PEOPLE....DO NOT USE MARGIN...!!
BUT TO SAY MARGIN, THE ROOT CAUSE OF INVESTMENT FAILURE...IS MISLEADING AND NAIVE LOH...!!


pisanggoreng
704 posts Posted by pisanggoreng > Mar 19, 2016 04:10 PM | Report Abuse

stockraider,

why paste so much what other people had said
you think the readers here has no memory what they have read.
just write what you want to say, learn to be more straight forward in you expression
one simple personal request from me,
PISANG GORENG...PLEASE RESPECT OTHER PEOPLE STYLE MAH...!!
IF U MAY NOT LIKE IT....BUT THIS IS RAIDER WAY LOH..!!

don't use too much loh,loh,leh, leh,...
i feel not necessary , it doesn't make your speech sounds more like an "old-hand or high-hand"
AGAIN THIS IS RAIDER STYLE....AND LIKE....IT HELP RAIDER TO THINK BETTER LOH....!!


3iii
136 posts Posted by 3iii > Mar

Posted by stockraider > 2016-03-20 02:59 | Report Abuse

Posted by 3iii > Mar 19, 2016 04:15 PM | Report Abuse

raider is using margin trading.

He uses margin because whatever cash he has was not enough for his investing.

He is beholden to his tukang titik who provided him with margin financing.

He cannot badmouth margin trading as this would be bad for his industry, which his friends are closely into.

He is a good chap to observe but not to follow unthinkingly.

The stocks he likes or bought, he will defend these as having a margin of safety.

I have yet to comprehend how he gets his margin of safety after so many years observing his trades. :-)

RAIDER SAY U CAN BAD MOUTH MARGIN, IF U GIVE THE CORRECT FACT MAH...!!
BUT MARGIN....IS HUST A NEUTRAL INSTRUMENT LOH...!!

AS FOR MARGIN OF SAFETY....RAIDER A TRUE PRACTIONER OF SIFU B GRAHAM LOH...!!

RAIDER DO NOT ENDORSE YOUR OVERVALUE BLUECHIPS....LIKE PETDAG, NESTLE, DLADY, PBANK AS HAVING MARGIN OF SAFETY BCOS IT IS REALLY OVERVALUE LOH...!!

Posted by Desa20201956 > 2016-03-20 05:03 | Report Abuse

Peter Diamandis: Elon Musk deserves his success because he risked everything

learn to take risk, confront risk , manage risk. including margin accounts.

a famous i3 member famously posted about margin calls..........

but margin call is not the end of the world, he is still up a few hundred percent at the point of margin call...puzzled?

Posted by stockraider > 2016-03-20 11:30 | Report Abuse

Quote from: iiinvestsmart on Today at 06:56:45 AM
Essentially, raider is agreeing that 90% of thopse in the stock market should never use margins.

As for the other 10%, let raider tell us what happemed to them during the Asian Fonancial Crisis to those who are using margins?

RAIDER COMMENT;
No...raider only agree that, those incompetent & lose monies....should not involve at stockmarket mah....!!
Thus only Leaving the competent....that should be involve in stockmarket....loh...!!

Since the remaining balance of investor, they are competent..........they are encourage to use to magnify their return mah...!!

But using margin is at the investor option and perogrative loh....!!

Not all will use margin even competent...due to Age Old prejudice and misinformed..and misinterpretation....a good example is like investsmart and kcchong mah...!!

Posted by Probability > 2016-03-20 11:48 | Report Abuse

From Raider's points...what I can conclude so far on how one can benefit from Margin Finance:

(1) You really need to diversify probably more than 20 over stocks from different sectors in your portfolio.

(2) You have to limit the Margin Finance to your Self funded Equity with a very much higher Safety Margin...instead of max 1:1 ratio...1 Self funded to 0.5 Margin Finance...so that even if stock market crashes comes close to 30%...you wont be forced to sell your Equities.


You really have to strictly follow the above and you cant really expect an extraordinary gain due to you large diversification...probably u will make 1 or 2% more over the Margin Finance Interest rate from the Margin Financed Equities.

I believe the above is mainly because Investment in stock market is not the same like Real Assets where you don't have a forced selling scenario when the Real asset value is valued much lower than your original purchase value simply because it did not generate Income at all or its ROIC is < COD during the first few years (short term).

Posted by stockraider > 2016-03-20 12:17 | Report Abuse

Posted by Probability > Mar 20, 2016 11:48 AM | Report Abuse

From Raider's points...what I can conclude so far on how one can benefit from Margin Finance:

(1) You really need to diversify probably more than 20 over stocks from different sectors in your portfolio. YES...!!

(2) You have to limit the Margin Finance to your Self funded Equity with a very much higher Safety Margin...instead of max 1:1 ratio...1 Self funded to 0.5 Margin Finance...so that even if stock market crashes comes close to 30%...you wont be forced to sell your Equities.
HAVE A LOWER GEARING IS PRUDENT....BUT A CRASH NOT TO FORCE SELL IS TOTALLY WRONG MAH....!!
SELLING WHEN THERE IS LOSSES IS PRUDENT LOH....!!
JUST LIKE WHAT KYY SAYS MARGIN CALL IS GOOD LOH...!!
U JUST NEUTRALISE THE MARKET FALL IMPACT LOH....!!
BUT ALWAYS BE ALERT TO GET BACK IN....ESPECIALLY THE STOCK WITH GOOD MARGIN OF SAFETY....WHEN MKT STABILISE....OR THE PRICE FALL TO A VERY VERY ATTRACTIVE LEVEL LOH...!!


You really have to strictly follow the above and you cant really expect an extraordinary gain due to you large diversification...probably u will make 1 or 2% more over the Margin Finance Interest rate from the Margin Financed Equities.
NOT TRUE LOH...THE GAIN CAN ON THE AVERAGE USUALLY DOUBLE USING MARGIN COMPARE WITH NOT USING MARGIN LOH...!!
WHY THIS IS SO ? IF U DON USE MARGIN....U ONLY PREPARE TO USE UPTO 70% TO 80% LEAVING SOME CASH TO TAKE ADVANTAGE OF OPPORTUNITY LOH...!!
A GOOD EXAMPLE IS ICAP....WHY IT FAIL TO PERFORM FOR THE PAST 4 YRS ?
BCOS IT HAS KEEP TOO MUCH CATCH AND UNDER INVESTED LOH....!!
WITH MARGIN U CAN GO 100% TO 120%....STILL GOT BULLETS TO TAKE ADVANTAGE OF OPPORTUNITY LOH...!!

I believe the above is mainly because Investment in stock market is not the same like Real Assets where you don't have a forced selling scenario when the Real asset value is valued much lower than your original purchase value simply because it did not generate Income at all or its ROIC is < COD during the first few years (short term).
THE FORCE SALE THING....IS A DOUBLE EDGE SWORD....IN CERTAIN CONDITION..U REALLY BENEFIT LOH....!!
BUT OF COURSE....SOMETIME U R AFFECTED TOO LOH...!!

PEOPLE SAY BULL MAKE MONIES...!!
PEOPLE SAY BEAR MAKE MONIES...!!
ONLY PIGS DON MAKE MONIES LOH...!!

Posted by Probability > 2016-03-20 13:36 | Report Abuse

Raider...I didn't get you when you said :'forced sell - in certain condition you can benefit'...how is that?

You procured it at a higher price and because others selling brought down the price...you are forced to sell at a lower price. How do you stand to benefit...hope u can elaborate more.

And also, can you elaborate on this issue:

"Being a successful value investor requires that you have staying power. “Leverage can’t ever turn a bad investment good, but it can turn a good investment bad. When you are leveraged you can run into volatility, that impairs your ability to stay in an investment which can result in a permanent loss of capital.”

Posted by stockraider > 2016-03-20 14:16 | Report Abuse

Posted by Probability > Mar 20, 2016 01:36 PM | Report Abuse

Raider...I didn't get you when you said :'forced sell - in certain condition you can benefit'...how is that? A GOOD STOCK MAY SUBJECT TO FORCE SELL....AND AGAIN TAKE SOME TIME FOR IT TO RECOVER MAH...!!
JUST LIKE CIMB....IT USE TO BE AROUND RM 8.00....BUT IT WAS SELLDOWN TO RM 4.00....AND NOW HAD RECOVERED SLIGHTLY LOH....!!
SOME IMAGINE U R A CASH HOLDER OF CIMB....HOLDING COST OF RM 8.00..NOW AT RM 4.70....U WILL MAKE A SUBSTANTIAL LOSS OF MORE THAN 50% LOH..!!
BUT MARGIN HOLDERS....THE SELL TRIGGER WILL ALERT THEM TO SELL WHEN IT IS RM 7.00 TO RM 6.00 MAH....!!
HE CAN NOW BUY BACK CIMB....NOW RM 4.80 LOH....!!
SO FORCE SELL....HELP TO LIMIT LOSSES.
FORCE SELL...HELP HIM TO BUILD CAPITAL TO BUY BACK AT LOWER PRICE MAH...!!

You procured it at a higher price and because others selling brought down the price...you are forced to sell at a lower price. How do you stand to benefit...hope u can elaborate more.
U LIMIT THE LOSSES...IF U HOLD OWN U LOSE 50%....BUT U SELL ...U LOSSES IS LESS THAN 15% ....PLUS U GOT A CHANCE TO COMEBACK LOH...!!

And also, can you elaborate on this issue:

"Being a successful value investor requires that you have staying power. “Leverage can’t ever turn a bad investment good, but it can turn a good investment bad. When you are leveraged you can run into volatility, that impairs your ability to stay in an investment which can result in a permanent loss of capital.”
YES....STAYING POWER IS IMPORTANT....!!
USUALLY U WILL MAKE MONIES IN LONG RUN.
BUT MARGIN HOLDER HAVE AN OPTION....WHETHER TO RUN N COMEBACK...TO RUN JUST ENOUGH TO SATISFY A COMFORTABLE MARGIN.!!
BY SELLING SOME....U....STILL CAN BE A LONG TERM EQUITY INVESTOR LOH...!! EXAMPLE CIMB....!!
U HAVE OPTION TO BUY BACK MORE....WHEN TIME IS RIGHT LOH...!!

Posted by Probability > 2016-03-20 15:18 | Report Abuse

Raider...I thought when you are forced to sell...then you have already reached the Margin limit. How to find more fund to buy back at a lower price...and isn't it much likelier that the price shoot up higher than your selling price after the forced sell.

Unless...you reallocate by selling other stocks and buy CIMB at 4.00..is that what you mean?

Posted by kcchongnz > 2016-03-20 15:48 | Report Abuse

Posted by stockraider > Mar 20, 2016 02:16 PM | Report Abuse
A GOOD STOCK MAY SUBJECT TO FORCE SELL....AND AGAIN TAKE SOME TIME FOR IT TO RECOVER MAH...!!
JUST LIKE CIMB....IT USE TO BE AROUND RM 8.00....BUT IT WAS SELLDOWN TO RM 4.00....AND NOW HAD RECOVERED SLIGHTLY LOH....!!
SOME IMAGINE U R A CASH HOLDER OF CIMB....HOLDING COST OF RM 8.00..NOW AT RM 4.70....U WILL MAKE A SUBSTANTIAL LOSS OF MORE THAN 50% LOH..!!
BUT MARGIN HOLDERS....THE SELL TRIGGER WILL ALERT THEM TO SELL WHEN IT IS RM 7.00 TO RM 6.00 MAH....!!

A cash holder of CIMB, using his own money of RM100000 to buy CIMB at RM8.00, would have lost only RM33000 at the present price of RM4.80, even if he is still holding the shares. The loss is 41%, and not your “U WILL MAKE A SUBSTANTIAL LOSS OF MORE THAN 50% LOH..!!”

For simplicity sake, let us look at a simple case.

You advised a newbie to invest in CIMB shares “using margin to the limit”. You asked him to invest RM200000, RM100000 is his own money and the other RM100000 from margin finance, because the interest rate was so cheap, and it is stupid not to use margin finance to make more money to buy a good share like CIMB, plenty of margin of safety mah!

Then the poor fellow encountered force selling at RM6.00, or 25% drop of the share price. He has now incurred a total loss of RM500000 because of the margins.

Nevertheless, the margin user seems to be happier, according to you, because his shares have been forced sold at RM6.00, and now he has “build up his capital” of RM50000, although he has made an exaggerated loss of RM50000 already.

Now you advise him to buy CIMB at RM4.80, a much lower price than his forced sold price, and that CIMB is such a good company.

Questions:

1) Are you advising him to buy using his own money of RM50000, or “use margin to the limit” again by using another margin finance of RM50000?

2) If the earlier option, he has lost RM50000, or 50% of his own capital, he needs to make 100% to recover. How long do you think he has to wait, just to recover his loss?

3) If the option is the later, what would happen if CIMB drops another 30%?

4) Or you think the scenario is (3) above won’t happen? Why are you so sure?

Have you seen a couple of stocks in the portfolio posted here, a genuine portfolio, and not randomly selected stocks to fail margin finance, have lost more than 50% in just three months, even when the overall market went up?

5) If (3) above happen, what would be your advice again? And why?