Monday, September 24, 2012

Market is down, should I buy or should I sell?

Market has been on the quiet side for the last few weeks. I am not going to use KLCI as a benchmark to quote the performance of the Malaysian market as it is probably been much supported by some of the local sovereign funds. The biggest question is as a value investor, should I buy or should I sell?

I am not a momentum trader. I am in fact a very boring (I think so) investor. I do think I have any tips to provide, unless of shorter term opportunities (not really an arbitrage but close) such as the ones with IGB and ECM which I have mentioned about. Well IGB's REIT is already listed - done. ECM's short term trade is still alive.

As for trading tips, my problem with past experiences are that I have made losses from tips more than I have gained. Hence, I have stopped listening to tips long time ago and I have found that this is the way to go. I used to allocate a portion (around 20% to 30%) of my investments portfolio into buying less fundamental stocks (ones that would not have gone through the PN17 drain but these are not great stocks). The problem with this is that, I have not been successful as a trader and more often failed. You cannot fight the market. But you can own fundamentals or be a part owner (however small) of a good, well managed company.

Picking great companies is not as tough as some people might have thought. Ground work is needed though. Now, the problem with the market is that bad stocks outnumber good ones by quite a high margin. You cannot do a random pick or just listen to rumours and hope for the best. Traders have different mentalities and they are probably trained psychologically to trade. The fact of the matter is that though - trading can be a zero sum game. Taking the costs (time and commission paid), it is a negative sum game. Why bother when it is a negative sum game? Do you ever think you can beat the market this way when the odds are stacked against us - they (the larger traders and insiders) have databases of who buys, who sells. They know how many stocks are in the float. How many are short term holders - i.e. considered weak holders as well. Their trading costs are lower than ours. Who do you think will win from here? They are starting from the 10meter line in a 100 meter race.

Back to the current scenario - where market is off its strength i.e. on a little weak side but just for the last 3 weeks or so. This is the best time to look into the stocks which we deem to be great and we would like to keep for a longer period. It may not be time to buy as yet - again I may be wrong - as usually market can weaken for quite a while. Remember, I was saying that the market was at a stage where it was getting overpriced.

I think for me, this is time to reevaluate my portfolio, maybe change some or reposition the portfolio between local holdings vs foreign holdings. Stocks are getting cheaper but not that cheap.

Once it is getting cheap enough, I will be much more active. :)

1 comment:

Everydayisfri said...

Im just started to learn to invest in stock market. I know that to have higher success rate, we need to study the value of stock instead of listen to tips and rumours.
However, as I was science background, I find that I can't understand much about the Financial Report of company, with those financial terms make me blurred.
I think I need your expertise advise: how a science background adult learn to invest in stock? Should I take up a course? If tat so, is there any course available in the market which from your opinion is good for adults?
Hope to hear from you soon, thanks.