Sunday, January 22, 2006

My Investing Journey-Going With The Crowd 0 comments

(P.S: Sorry for any disturbances the advertisements above may have caused you)
The most difficult obstacle facing a newbie investor fresh into the stock market is the lack of an overall system for picking out the best stocks in the market. This is, of course, compounded by the fact that he would not know most of the companies trading on the market at all, outside the GLCs like DBS, Singtel, SIA that constitute the STI. To a large extent that was why I stuck with familiar stocks like NOL and Sembcorp in my first few initial trades. It was for want of better choices which I felt comfortable with.

Without any systematic stock-picking routine it is easy to succumb to other people's opinions and the urge to chase the hot stocks of the day. The online forums, retaining their popularity in 2000 despite the collapse of the dot-coms, were rife with all kinds of forummers pushing the merits of various stocks which they had obviously bought into. Combined with the online trading system which facilitated real-time price monitoring and instantaneous keying in and filling in of orders, stock trading was almost like a computer game, inducing the same kind of adrenaline once one was vested in a stock, only differing in that stock trading actually involved real money (actually I hear nowadays even computer games can involve trading of real money for virtual assets, so it's really convergence of reality and virtual reality).

I was encouraged by my successes in Sembcorp and NOL (albeit paper profits which would later turn to losses for NOL) which each appreciated by about 20% within about 3 months after I bought them. That, I think, was the moment when I got more interested in the stock market and started monitoring prices daily after work. Nothing like the smell of money to perk one up and hanker for more. The problem, of course, was that I focused on watching the prices but not on learning the fundamentals and industry dynamics behind the prices. Nowadays, when I have developed a stock-picking system to provide a routine overview of the stocks on the Singapore market, I automatically think about such fundamentals issues. When one forces oneself to decide which stocks out of the 600-over stock universe are worth buying, and to make comparisons between peers within the same industry, he will over time develop an investment philosophy and cultivate industry knowledge to facilitate efficient sifting of the wheat from the chaff.

Without such a system in place in my early investing days in 2000, and ready to put more money to work following the initial successes which I had not expected (I had been prepared to pay tuition fees in my first few trades), my ears were too soft and my wallet ready to be lightened as I relied heavily on "instinct" to pick my stocks. "Instinct", of course, for a newbie, boiled down to the most recent credible stock recommendation I had read, and whether I had been in a good mood when I read it. That was what led me to the construction stocks, Hong Lai Huat and Ipco.

(to be continued...)




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