The first book I read about stocks is “How to make money in the Stock Market for IDIOTS”. Wahahahaha. I read that book 3 years ago in 2003. It is really an idiot book and do give me (the idiot) an introduction about the stock market. But it didn’t teach me how to make money like the book title says. I don’t recommend this book to anyone even if you strongly believe that you are an idiot. (this book make you an idiot instead of teaching idiot)
Later I went to a RM400 introduction seminar on Technical Analysis organized by iCapital.biz (they have a column in the newspaper and now they manage a close-end fund listed in KLSE with the symbol ICAP). I got introduced to technical analysis and find it very interesting. It is about stock market charts and how you can make money by looking at them! The speaker show you some charts with technical analysis indicators and tell you, “You buy here, sell here, buy again here, sell here … and see how much money you make!”. Cool!
Later I bought a Technical Analysis book from Amazon called “Technical Analysis for the Financial Market” by John J Murphy. They claimed that Mr Murphy is the father of technical analysis. The book does cover a wide range of technical analysis indicators, so much that I didn’t complete the book. And because of the wide coverage, I personally think that the explanation on each indicators is insufficient. Personally, I do not recommend this book as well.
I traded in the KLSE stock market in 2004 as an idiot using Maybank2u. But this little idiot did make some good money by picking the hot stocks! It seems like whichever stock I picked, it made money! I thought I am very smart (a virgin in stock market that makes money, if it is not smart then it is what?). Note: I didn’t use any analysis (even technical analysis) or method or system in picking my stocks, I only use my feeling. Something like, “I feel like this stock is good, so I buy”.
But what I didn’t realize was that in 2004, it is a BULL market due to the coming 2004 general election! (They say that when election is near, the politician party will push up the market to get cash for their political campaign, they ‘fry’ the stock market).
When Barisan National win big in the election, stock market shoot up like rocket and I sell all my holdings, cashing in my money. After I sold my stocks, Datok Seri Najib was elected as the deputy Prime Minister and the stock market immediately shoot up another level to the moon. Since I already sold my stocks, I didn’t get any money from Mr Najib!
And because I’ve made some good money in the stock market, I thought making money is really that simple. And because I miss out Mr Najib’s big money because I sold too early, I feel bad and want to ‘revenge’. I want to make back MY money! Wahahahaha! So I continue to buy stocks after the election.
I open a new OSK trading account to get a better trading platform. I bought 8 stocks based on hot news on newspaper, hot tips from the internet forum and maybank2u staff. They are all active counters, which means HOT counters, counters that when you watch news on TV, they will appear at the end of the news as the 10 most active stocks of the day. Stocks that people are most interested in at that time.
Let’s look at my portfolio and my performance!
1. CAMERLYN – Bought $1.09 Sold $1.005 (-8%) in 3 months. Buy because internet forum say it is going to be ‘fry’ by big boss.
2. MHOUSE - Bought $1.90 Sold $1.64 (-14%) in 3 months. Don’t know why I buy. zzz.
3. KRNSOFT – Bought $1.10 Sold $0.91 (-17%) in 3 months. Buy because it keep going up like no tomorrow.
4. LIQUA – Bought $2.27 Sold $1.85 in 1 day (-19%) . Buy because it is the hottest stock at that time and it is ‘fry’ to very high.
5. SCOMI – Bought $1.70 Sold $1.45 (-15%) in 6 months. Buy because it keep going up like no tomorrow and it is Pak Lah’s son company.
6. LIONIND – Bought $1.88 Sold $1.44 (-24%) in 2 months. Buy because newspaper say it is going to rise to the moon.
7. LIONCOR – Bought $1.71 Sold $1.36 (-21%) in 2 months. Buy because newspaper say it is going to rise to the moon.
8. PWORTH - Bought $1.20 Sold 1.01 (-16%) in 2 weeks. Don’t know why I buy. zzz.
I want to cry. I lose a lot of money including everything that I’ve made before the election. Wasn’t it making money from the stock market easy? Hmm….What if I don’t sell my holdings and hold it until today? Since they say we need to be long term investor and if we didn’t sell, we didn’t lose any real money and it will recover one day! Let’s take a look at their price now if I didn’t sell (after 2 years).
1. CAMERLYN – $2.56 (+134%)
2. MHOUSE – $0.72 (-63%)
3. KRNSOFT – $0.08 (-93%) wahahahaha! Waiting to file for bankruptcy.
4. LIQUA – $0.255 (-89%) wahahahahha!
5. SCOMI – $0.96 (-44%)
6. LIONIND – $0.93 (-51%)
7. LIONCOR – $0.59 (-65%)
8. PWORTH – $0.72 (-40%)
Now if you look at that, I am consider very lucky! For those who hold on to their stock until today, there is no chance at all that they will recover! This happens to my mum and dad and grandmother who refuse to sell and hold it until today! All their hard earned money is gone FOREVER. They hold rubbish stock for more than 10 years, buy them at all-time-high and now at their all-time-low. They still say things like ‘we are long term investor’, ‘if we didn’t sell, the lost is only on the paper and it is *still* possible to recover’… This is called ignorant and ignorant can cause you all your money. I lost 20% of my money which is already very PAIN.
Imagine if I pretend that nothing happen by closing one eye? This is LIQUA 3-year chart until today.
Look at how the stock being ‘fry’ from below $1 to above $2 in a short period of time? Many people get greedy (including me) and want to be part of the craze to make BIG money. I got in at $2.27 and got out at $1.85 the next day because of panic selling. Lost 19% in 1 day! The stock recover the next day and many people get in again. 1 weeks later, the stock crashed from above $2 back to below $1 in 2 days. if you buy at $2 and sell it at $1, you lost 50% of your money. If you sell it at $0.50, you lost 75%. If you sell it today at $0.255, you lost 88%!
In simple mathematics, if you have $10,000 and you lost 50%, you left $5,000. And you need to gain a full 100% to just BREAK EVEN! If you put that money in 4% annual fixed deposit, it will need 18 years for it to get back to $100,000! Even if the bank pays you 10% annual return, you still need 8 years! (compounding returns)
I end my story today with Warren Buffet’s 2 rules of investing. He is the 2nd richest man in the world as an investor and you really need to listen to what he has to say about investing!
Rule #1 – Don’t Lose Money!
Rule #2 – Don’t Forget Rule #1!