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TIPS FOR SUCCESSFUL INVESTING

Updated on December 6, 2010

 Basic Principles....
1. Do not invest in unlisted shares
2. Invest in active shares
3. Diversify your investment
4. Don’t over-diversify
5. Ensure liquidity of your investment
6. In all investment there is a trade-off between reward and risk
7. Investment risks can be reduced through knowledge and experience
Understanding the Stock Market....
1. The stock market always over-react
2. Stock market price never go straight up or straight down
3. Greed and fear are the two most dominant emotion that influence stock market behaviors
4. The stock market are irrational in the short-run, but rational over the long-term
Tactics and Strategy
1. Do not speculate unless you have a natural flair for it
2. When investing in shares go for long-term investment
3. Stock market dominated by short-term trader and speculators
4. If you must buy and sell frequently, use the major cyclical swing in the market
5. Companies that manufacture or market consumer product are generally steadier and sounder investment
6. Bank on growth, growth, growth
7. Investment in companies with a low price earnings ratio(P/E)
8. The best investment opportunities always exist in most unlikely places
9. Bay share in companies that are currently out of favour
10. Don’t confuse a share’s intrinsic worth with it market price
11. “Buy dear, sell dearer” is generally a better investment strategy than “buy cheap and sell dear”
12. Never hold a share which you wouldn’t buy at its current price
13. Beware of bargain hunting in the stock markets
14. Don’t put too much reliance on charts and technical analysis
15. Be on the lookout for right renunciations
16. Selecting which share to buy is always easier than when to buy it
17. It is harder to take good selling decisions than good buying decisions
18. Average up is sound investment strategy
19. Never average down
20. Don’t invest in new issues of new companies promoted by unknown and untried managements
21. A company is generally good or as bad as it investment
22. Invest in companies which have a clearly identifiable plus factors
A STEP-BY-STEP GUIDE TO ACTUAL INVESTING
Preliminary Screening.....
1. Don’t buy unlisted shares
2. Don’t buy inactive shares
3. Don’t buy shares in close held company
Examining the Company....
1. What is the quality of the company’s management?
2. How large is the company?
3. Does the company concentrate on its core competence or is it sufficiently diversified?
4. Is it growth company?
5. What is the company’s environment like?
6. Does the company have labour problem?
7. Analyzing the company’s finances
a. Ploughback
b. Reserve
c. Book value per share
d. Earning per share(EPS)
e. Price/Earning(P/E) ratio
f. Yield
g. ROCE, RONG and PEG ratio
Making an Investment Decision.....
1. What to buy?
2. At what price to buy?
3. When to buy?
Some Suggestion for Better Timing.....
1. Don't buy a share imm after a steep rise in its price
2. If you want to sell a share, do so imm after a steep rise in its price
3. Don't sell a share imm after a steep fall in its price
4. A sharp fall in prices offers an opportunities for buying
5. If you have a promising growth share in mind the best time to buy it is when the public loses interest in the share
6. Share prices usually record a sharp rise just before any expansion project
7. Companies often issue press releases after their expansion plans
Four Simple Rules for Selling.....
1. Don't wait for the Highest Price
2. Sell a share when your target price is reached
3. Once you realise you made a mistake- Sell
4. Sell a share if you wouldn't buy it at its prevailing price


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