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In this turmoil time, it is good to go back to the basic. Any software that include all this secret??
Is it applicable to MALAYSIA KLSE???
Secret #1: Invest in quality businesses, not stock symbols
MOST PEOPLE, investing in a stock is little more than watching the trail left by the stock symbol as its price wanders along some drunken path. They know that the symbol is associated with a company while not being too sure what is expected of this company to ensure that its share price will rise. It is a case of let’s sit back and hope for the best.
Secret #2: Don’t invest for ten minutes if you’re not prepared to invest for ten years
WHEN WE LOOK at the share price of a company we usually see a wildly fluctuating graph with mighty hills and plunging chasms.
Secret #3: Scan thousands of stocks looking for screaming bargains
ONLY A HANDFUL of outsiders have been permitted to enter the inner sanctum of the Berkshire Hathaway offices in Kiewit Plaza, Omaha. When Chris Stavrou, the founder of the New York asset management firm, Stavrou Partners, visited the offices he reported seeing hundreds of file drawers full of reports on thousands of companies.
Secret #4: Calculate how well management is using the money they have
HOME BUYERS UNDERSTAND about equity. It is the value of the home less the amount owed to the bank. The same is true of a business. Its equity is the total assets minus all the liabilities. You can think of this as the money locked up in the business. It is a measure of how much money management has to run the business.
Another measure of the money available to management is the capital of the business. This is its equity plus the long-term debt of the company.
Secret #5: Stay away from “glitter” stocks
THERE ARE MANY thousands of stocks to choose from: in the USA over 10,000 stocks, in Canada over 3000 and in Australia over 1,500. Faced with these massive numbers and the associated deluge of information, investors get drawn to what I call glitter stocks. These are stocks that have some attention grabbing activity such as high trading volume, extreme movements in the price whether up or down, or when the stocks are in the news.
Secret #6: Know what a fat pitch is and what to do with it
WARREN BUFFETT LIKES to use examples from sport to outline his investment ideas. He particularly likes to use baseball with references to Ted Williams, the former record holder for the Boston Red Sox. A few years ago Buffett said W
We try to exert a Ted Williams kind of discipline. In his book The Science of Hitting, Ted explains that he carved the strike zone into 77 cells, each the size of a baseball. Swinging only at balls in his “best” cell, he knew would allow him to bat .400; reaching for balls in his “worst” spot, the low outside corner of the strike zone, would reduce him to .230. In other words, waiting for the fat pitch would mean a trip to the Hall of Fame; swinging indiscriminately would mean a ticket to the minors.
Secret #7: Calculate how much money you will make, not whether the stock is undervalued or overvalued according to some academic model.
AS AN INVESTOR what is the right question to ask? Most ask whether the stock is undervalued or overvalued. The problem with this is that there is no way of properly determining whether a stock is, in fact, undervalued or overvalued.
There are various academic models for calculating what is called the intrinsic value of a stock. From my extensive experience as a research mathematician all these models, referred to as discount cash flow models, are fatally flawed. There are four areas that bring them down. They are theoretical, contradictory, unstable and untestable.
Secret #8: Remove the weeds and water the flowers — not the other way around
FOR MANY IT is worse than having a tooth pulled to sell a stock for a price lower than what they paid for it. If you buy a stock for $20 and it drops to $10, so long as you don’t sell, then it can be referred to as an unrealized loss. In this case you can say to your spouse, “Don’t worry, dear. It’s going to come back.”
Similarly, many can’t wait to sell as soon as they can see daylight between the purchase price and the current price. If the price has gone up be a few dollars, they want to sell and “lock in the profit”.
Peter Lynch and later Warren Buffett referred to this as watering the weeds and pulling up the flowers. They are examples of what I call investor diseases. The disease of holding on to your losers I call get-evenitis. The disease of selling winners I call consolidatus profitus.
Secret #9: Become a conscious investor
THE FAMOUS GRAPHIC artist M.C. Escher said that “most of the time we are meekly sleepwalking on a treadmill.” In other words we are acting in an unconscious way and making little progress. This certainly applies to investing. Most of the time decisions are made based on either hope and wishful thinking or on abstract academic theories.
Fortunately investing is an area that responds well to becoming more conscious of what we are doing and why. “Risk comes from not knowing what you are doing,” Buffett said.
The whole direction of Conscious Investor is to place your investing, and hence your financial future, on a firm basis of sensible and knowledgeable investing.
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