Friday, 1 April 2011

My investment strategies - from books and practical experience

3 key rules
  1. Contrarian Approach - Buy at point of extreme pessimism (Market Bottom), sell at point of extreme optimism(Market Top). Buy on fear, sell on greed. Buy low, sell high. Detect from PE ratio, market sentiments, news, articles, newspapers, people's conversation on street etc
  2. Fundamental and Value Analysis - ONLY buy fundamentally strong stocks(blue chip, reits or others) with long term durable competitive advantage + good balance sheets at discount price and/or with at least decent 6% CONSISTENT dividend even during recession
  3. Technical Analysis - Determine a good entry point depending on market direction (up, down or sideways)

*Emotion management is important
*You can never sell at the exact top or buy at the exact bottom - always buy and sell in stages
*Be patient. Never chase a stock. If you cannot get your price, walk away and wait again.

Money Management
50 % cash: 50% stock: Never put entire networth in market. Always make sure that you got spare investment cash to buy when good opportunity arrive
Diversification into many stocks but not over diversify - look at whole portfolio instead of single stock for performance

When to sell? (else let winners run)
want to put money in pocket
make mistake to buy it in the first place
need money to make an investment on an even better company at better price
when the company seems like it is losing its durable competitive advantage or fundamental deteriorated
during bull market where they is frantic buying such that the current selling price of the company far exceed the economic realities of the company, PE ratio too high


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