I always argue with Kc on this margin thing loh...!!
If u r good in investment and find good stock with margin safety to buy, it is okay to use margin loh...!! Just like if u r a good businessman & u have good project, it is ok to borrow mah...!!
Yes borrowing increase ur risk a little bit, but if u have a good project or stock and u have the right skill...u can offset this minor disadvantage of margin mah....!!
Those people who lose monies using margin in the long run, are basically not good investors loh....!! Basically these people will lose monies, whether using margin or not using margin at all loh....!!
They lose bcos, their investment skill not good enough mah...not bcos using margin mah....!!
U need to be reasonable good in investment b4 u even consider margin loh....!!
ALWAYS REMEMBER TO USE MARGIN WHEN U R YOUNG AND NOT WHEN U R OLD LIKE, UNLIKE what KC SAYS LOH....!! IF U USE MARGIN YOUNG...U LEARN THE ROBES OF TRADE EARLIER AND U have time to recover from any failure AND MAKE U A GOOD INVESTOR FASTER LOH....!!
CONCLUSION IF U LOSE MONIES DON BLAME IT ON MARGIN...JUST BLAME YOURSELF WHETHER U R GOOD ENOUGH LOH ??
LOOK AT YOURSELF & ASK WILL U STILL LOSE MONIES, IF U JUST USE CASH to invest LEH ??
Let me ask you this questions,if a youngster follows the persistence peddling of somebody to buy Sendai at its peak at about RM1.40 6 months ago, with say RM100000.
1) How much he would have left now? 2) How much he would have left with 50% margin, say RM100k of your own money, and another RM100k in margin.
You know lah. This stock was heavily promoted as having billions of contracts and sure make multi-million profit one. Sure win, so sailang. Make more money use margin.
If a young man was convinced the use of margin by someone on the "stock on the century" in Hengyuan, and he was convinced to sailang with his saying of RM100000, and with another RM100000 from the bank, at the peak of euphoria a few months ago when HY was trading between RM17 to RM19.
How much is the leftover now,
1) with his own money 2) with the margin?
I am sure you agree this was a sure make-big-one-stock a few months ago.
Mine consist of essentially 3-5 year loans from investors. With maximum personal leverage of 50%. Ensuring that i can pay them back without ever having to sell my stocks.
When you use margin, you allow others to dictate when you sell the stock and at what price. Not a good idea imho.
And if you look at 2008 crisis, even berkshire lose 50%. Anyone with a margin of just 1X (can go up to 3x). Die already, it they cannot meet the margin calls.
Just because the expected value is positive. Does not mean you should buy it.
Russian roulette have a EV of 83%! but if you die one time, means gone.
Just avoid points of ruin. And Margin is one of them.
You can diversify all you want. But in crisis, correlation goes to 1. Everything drop for you to see. All the industries etc. At that time, only question is this.
There's no point talking to him. He is overconfident, doesn't understand complexity and nonlinearity and have no appreciation for the unknown. Those that normally gets killed in Black Swan.
NOTICE UR EXAMPLE IS THAT THE YOUNG MAN IS "CONVINCE BY THAT SOMEBODY" TO USE MARGIN TO BUY SHARE LOH....!! BUT IF I SUBSTITUTE THAT YOUNGMAN IS CONVINCE BY SOMEONE TO BUY SHARE USING " CASH"....THE END OUTCOME THAT YOUNG MAN WILL LOSE MONIES WHETHER HE BUY USING CASH OR MARGIN LOH..!!
YES I WILL AGREE THAT YOUNGMAN WILL LOSE MORE, IF HE USE MARGIN TO BUY LOH...!! BUT THE KEY IS THAT YOUNG LOSE MONIES BCOS LACK OF FINANCIAL SAVVY & NOT BCOS OF USING CASH OR MARGIN TO BUY MAH...!!
AS I SAY U NEED TO TARGET FINANCIAL SAVVY & NOT BAD MOUTH MARGIN MAH..!! MARGIN IS JUST A FINANCIAL TOOL LOH....!!
THE KEY IS THAT YOUNG GOT CON TOWARDS BUYING A STOCK LACK FUNDAMENTAL LOH....!!
Furthermore anyone who comes here are assumed to be of legal age and to trade according to their own ambitions.
if you don't want so much risk, then don't sailang / margin the high beta stocks......
if you sailang and margin a portfolio of blue chips....it would take more than a black swan to cause margin calls.....and even when margin calls occur...it is not the end of the world.....truly not the end of the world.
there are many ways to to create beta...and also endorsed by the authorities ....and that includes sailang and margin...also includes call warrants and futures......
you see.....only your lack of ambition and the negative people stops you from becoming what you are capable of.
KC is being very cautious in his advice to newbies as they do not have the experience to jump into the deep end. The percentage of them succeeding in making money from borrowed money is slim. Didn't want anyone to be in debts, that is all. A lot of people can do it but of course there are those who cannot. At the end of the day be aware of your capabilities and your chances of succeeding. No one can stop you but be warned of the consequences of your failure. Think twice before you act.
no loan from bank? If avoid margin but want to borrow like borrow money to buy house why cannot?
Posted by Jon Choivo > Mar 19, 2018 12:18 PM | Report Abuse stockraider,
I do use leverage, but not margin.
Mine consist of essentially 3-5 year loans from investors. With maximum personal leverage of 50%. Ensuring that i can pay them back without ever having to sell my stocks.
When you use margin, you allow others to dictate when you sell the stock and at what price. Not a good idea imho.
And if you look at 2008 crisis, even berkshire lose 50%. Anyone with a margin of just 1X (can go up to 3x). Die already, it they cannot meet the margin calls.
you're right kc, should have posted my comment in here instead, for a more positive discussion...
basically, you could use any of your calls, Prolexus, Latitude Tree, ECS, Kfima or even BIMB-wa over the last 2-3 years and LOST money, either by buying such counter with cash OR using margin finance (including interest costs)...
imagine spending long nights doing all that Warren buffet analysis and STILL being stuck for 2 years+!
kcchongnz Posted by arv18 > Mar 20, 2018 12:10 AM | Report Abuse Um KC, do you really want to go down this road? Lets take a look at some of your calls 1) Prolexus - Down from ~2.60 to 73 sen today (nice steady downtrend for 2 years) 2) Latitude tree - 8.00 to 3.69 (2 Year downtrend) 3) ECS ICT - 1.78 to 1.14 (2 year downtrend) 4) BIMB-wa - 65 sen to 29 sen Kfima, Plenitude On and on it goes...
A reader with a little bit of intelligence would understand this article is about how to read and interpret financial statements, in particular he awareness of cash flow, and not to be fooled by accounting earnings.
I do share a lot of analysis in i3investors, scores if not hundreds of stocks, but purely sharing my analysis, and valuations. I have never made any "calls" to buy any stock.
Please lah, if you wish to comment, you are welcomed, but have some sense and contribute positively.
What is this article about? Is your comprehension so bad?
This article is about advising the youngsters and newbies on the perils of listening to the touting of the use of margin finance in the stock market, to buy whatever shares, be in HY, Sendai or whatever.
It has nothing to do with any sharing of just a few stocks out of hundreds of stocks by anybody made 5 to 6 years ago.
Read more and think more,and hopefully your comprehension can improve.
Posted by arv18 > Mar 21, 2018 05:57 AM | Report Abuse
you're right kc, should have posted my comment in here instead, for a more positive discussion...
basically, you could use any of your calls, Prolexus, Latitude Tree, ECS, Kfima or even BIMB-wa over the last 2-3 years and LOST money, either by buying such counter with cash OR using margin finance (including interest costs)...
imagine spending long nights doing all that Warren buffet analysis and STILL being stuck for 2 years+!
kcchongnz Posted by arv18 > Mar 20, 2018 12:10 AM | Report Abuse Um KC, do you really want to go down this road? Lets take a look at some of your calls 1) Prolexus - Down from ~2.60 to 73 sen today (nice steady downtrend for 2 years) 2) Latitude tree - 8.00 to 3.69 (2 Year downtrend) 3) ECS ICT - 1.78 to 1.14 (2 year downtrend) 4) BIMB-wa - 65 sen to 29 sen Kfima, Plenitude On and on it goes... ===================
problem with kc approach to stock market....
not responsive to changes, no big picture, treats stock market as if it is a math problem.
...and bad timing.....every time, he come out with article talk bad about Sendai...Sendai jumps up.
each time KC comes out with bad article on Sendai, I make some money.
Posted by qqq3 > Mar 21, 2018 10:35 AM | Report Abuse problem with kc approach to stock market.... not responsive to changes, no big picture, treats stock market as if it is a math problem. ...and bad timing.....every time, he come out with article talk bad about Sendai...Sendai jumps up. each time KC comes out with bad article on Sendai, I make some money.
Sure, I was very sure you made big money when I wrote about it a few months ago when it was RM1.37, and then when it was about RM1.10, when each time you sailang. Good on you.
Posted by qqq3 > Mar 21, 2018 01:16 PM | Report Abuse kc.....every small cap stock.....those below $ 1 billion market cap....their P & L no stability. Today, Superlon, yesterday Poh Huat. yet.....these are the stocks you and OTB specialize in and call your selves value investors based on PE and your maths .....you and OTB no shame?
Me no shame?
From my various discussions with you, and whatever you write in i3investor, I can easily conclude that you know noting about accounting. But you claimed that you are a retired accountant.
From what I read from your comments, and a few posts you write, I can see you know nothing about investing. But you are damn good in PLP.
Hey, so old already still PLP like that, no shame ah?
kc.....go write letter to Munger and your beloved Warren.....ask whether such small caps with their unstable P&L can qualify to be called value investing...whether they want some?
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....
qqq3
13,202 posts
Posted by qqq3 > 2018-03-19 11:04 | Report Abuse
I am not sure even stock market works if there is no margin.