Sunday, February 22, 2009

10 Rules for Investment - Part I

Do you know how to invest in stock? I don't really know. But do know discipline and follow the rules do help us a lot, in terms of consistent profitability. Yes, this is very true if you are one of them, including Warren Buffet.

Since Warren Buffet is the 'God of Stock' for many years, whatever he said or did, we will follow him. So for his followers, are you able to reap profit from the stock market already? Well for me, follow people's idea might not always a permanent solution. Perhaps at the beginning stage is still okay. Eventually we need to rely on our own analysis and insight.

Warren Buffet, the richest man in the world. If we don't listen to him, who can we listen to?

I read a very interesting Taiwan magazine, 'Cheers' this morning, and would like to share with you all here. According to the magazine author, if you want to trade like Warren Buffet, there are 10 rules you might really need to take into consideration.

Rule $10
If you think a good trader must know how to calculate in complication, then you might need be a waiter first.

Basically, what you need is only basic calculation and calculating percentage output. Most importantly, you need to gather information about the company you want to invest, visit the related company, understand the structure of the company and how it makes revenue etc. As simple as it is.

Rule $9
You won't able to reap much profit if you buy hot pick stock.

It should be the time for you to let go the stock in your hand, when the particular stock price is rising dramatically. It should be the time for you to pick a good price for entering, when the particular stock is falling dramatically.

Just like Warren Buffet, he managed to buy China Petrol and hold it for many years when it is just on board. China Petrol is hiked like crazy during 2007 and it is the time when many people investing into it. But Warren sold all his stock in hand for about HKD12.4 per unit. The stock did shoot up to HKD20 and above, but it falls significant back to single digit after a short while.

China Petrol made a history of making many investors lost their money, but not Warren. Don't be greedy.

Rule $8
Don't ever try to ask the barber whether it's time for you to cut your hair.

Normally we will ask our consultant or broker whether there is any problem in our investment. In fact, we can find out by ourselves easily. In short, financial consultant, bank investor, lawyer, mechanic, doctor are all the same, they are solving people's problem to keep them survive. For the sake to survive, they will try the best to find out 'any problem' from you. You got the point here?

Rule $7
You want to be the worst lover within people's eyes but you are the great lover in reality or, you want to be the great lover within people's eyes but you are the worst lover in reality?

The rule of thumb is to keep your own thinking. You don't need to follow other people (or so called expert) opinion or the market trend. Or you don't even need to see how people think of you. We only need to focus on the fact and reality without the interruption of others.

Great lover, anyone?

Rule $6
It's just like a baseball game, don't simply hit the ball when there is no confident.

To be a good player in baseball game, you must wait for an appropriate opportunity to hit the ball. It's the same as a trader, you must be patient to wait for an opportunity. If you cannot predict the company future, don't invest into it. If the company has not earn any single cent, it won't able to make any money for you either.

Okay, it's kinda tired to translate & summarize from a Chinese article to an English article due to my broken language. But I still do hope you can understand what am I translated. Anyway, I think it's too long for me to list out 10 rules in a post. So I'll leave the other half into my next post.

Have a nice weekend, folks.

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