Red Is Not An Auspicious Color in Stock Markets
Blogged By: Low Hang Wei @ February 18th, 2010 - 9:27 pmChinese liken the color red to luck, however, any investor alive should be sensitive to the color red. Afterall, our losses are displayed in red, stocks falling are depicted as red… red is not a color we like to see when we login to check our portfolio. Unfortunately, the stock market is giving us plenty of red recently. My profits gets wiped out easily within days and the same is happening to all my friends. Gradually, all the unrealized profits we had are turning into unrealized losses.
However, I still believe that many years down the road, it will be a mistake if we choose not to invest our money. Afterall, inflation alone would kill our money if we did nothing to protect it. Yet, investing has risks involved and even investors in their early 20s can get heart attacks from the volatility in the markets. The more we save and invest, the more likely we are to have a retirement nest. Yet, it is also more likely that every move in the markets will make us panic and cry.
I still don’t have a superb approach to investing in stock markets, but I found that I’m becoming more down-to-earth in terms of investing. I have no desires to chase the hot stocks and that causes my portfolio to be the outlier among my friends. I’m not sure if it’s a good or bad thing for now, but for now, I am more of a fan in fundamental investing. It’s not that I am disregarding technical analysis, but it’s just not suitable for me at the moment.
I have a reason for that too. Massive players scare me when they suddenly change their queues from buy to sell and profits reverse too fast into losses. I feel that buying on good fundamentals assure me that even if the stock price were to drop, I will still make money from the dividends and over time, when people see that the dividends are good, the stock price will ultimately have to go up. The only sad thing about fundamental investing nowadays is that we may never know if financial statements are manipulated, history has shown us many cases. Still, I am more keen to stick to fundamentals for now.
I am also planning to start writing about stocks in this blog and I know I am still a new investor. Regardless, I feel it doesn’t hurt to share my views and if something I write doesn’t make sense, I hope to get corrected and learn from it. I believe posting my analysis will help more than if I keep it to myself. If I can find time to write, expect to see my analysis of stocks soon.
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March 8th, 2010 at 2:27 pm
You know in China they use red for stocks that go up and green for stocks that go down. check out www.sse.com.cn
My account managed to gain about 15 times my capital within 1 yr. Thanks to stimulus inspired rally. However, I think it will all unravel in the coming months.
Despite my use of leverage, I’ve been navigating the market quite well using a number of models I developed in my spare time.
I’ll BRAVE put out 2 predictions (did they say NEVER try to predict the market??) just for fun in your blog but we can come back to them later in time just for the fun of it. If I’m right, I’ll explain how its done. If I’m wrong, I’ll be just like the many run of the mill analysts out there who earn money making useless predictions.
Here is my prediction for this market:
a) Despite worries on and off about sovereign debt and mixed signal in the economy the market will keep going up due to liquidity for the next 2 months.
b) A peak will be formed in May 2010. The market will come down and correct.
c) The market will rise back up to form another peak in Aug 2010…and that will be the end of this rally.
Basically, I predict there will be 2 tops in this market - one in May and the other in Aug.
The models I use is related to tracking liquidity in the economic system and carry trades. The one assumption I’ve made is the current economic recovery will falter by the end of this year.
March 8th, 2010 at 2:48 pm
Hang Wei,
You said, “However, I still believe that many years down the road, it will be a mistake if we choose not to invest our money”.
I think you should be very careful about this assumption. Ultimately, weighed down by heavy debts, there may be only one way out of the current situation - destruction of debt. This will be deflationary. In the short term we are starting to see plenty of inflation price of oil hitting $80 per barrel commodity prices surging etc.
My blog discusses in some detail some of these issues..feel free to read them:
http://singaporemind.blogspot.com/2010/02/economy-where-we-are-headed.html