Hovid
I only have 10 grands to invest
I had an interesting conversation with my friend's young son over the
last weekend. He asked me what to invest. I told him to buy a property
when he is still young. He said it is out of question at the moment. He
just started to work not too long. Then I told him to save enough and
prepare to buy property as soon as he could afford it. He complained
this is boring, not that save money itself is not important but the
amount he could manage to save every month is so paltry that it just
doesn't motivate him. It is a plausible reason by a 20-plus young man in
view of current cost of living environment.
He shyly told me that he has 10 grands in his fixed deposit account and
he wanted to maximise the returns. He wanted to invest in the stock
market. The conversation goes something like this:-
Boy : UncleZ, do you have any good shares to recommend?
UncleZ : No need any recommendation. Now the stock market is so positive. Chances are, any stock you pick will go up.
Boy : My friends said the same thing too. They told me they had
made many rounds of pocket money. But they got burnt by Dsonic
recently. Now I am a bit sceptical. Any advice from you, UncleZ?
UncleZ : Did you ask them why they got burnt in the first place?
Boy : They quickly cut loss when the share dropped so drastically.
UncleZ : That's the problem. Anyway, before I tell you what to invest, tell me your expectation of capital returns?
Boy : I hope could double my capital. My 10 grands become 20 grands.
UncleZ : That is 100% ! How long would you like it to happen?
Boy : Maybe in half a year's time. oh no, it would be nice in 3 months.
UncleZ : Young man, why don't you look at it this way. Bank interest for
FD is 3% - 4% per year. So, your investment in stock market should give
you returns higher than that in FD. It has to be. Because of higher
risk in stock market, the returns must be 10% at the minimum. So, why
not take 10% as a start instead of 100%.
Boy : What? 10% only? that means only 1 grand profit in a year's time? That doesn't sound interesting, UncleZ.
UncleZ : You have to manage your expectation mindset first before
you put your foot into the stock market. It is a jungle out there. A
merciless one on top of that.
Boy : I heard people make money by just making few phone calls a day. Few hundreds, some few thousands a day easily.
UncleZ : True. It is possible. But you are not them. In fact, probably
you won't hear when they are making losses. You only hear when they are
making profits. Look young man, of course making 10% from stock market
is no brainer. You should target to make 100% profit but with a
different mindset. Your mindset must be that of long term view. It may
takes you 2 years to realise the 100% profit. If you are good in this
game, 100% profit in 1 year is possible. If you managed to get 100%
profit in half a year's time, that's bonus!
But to set a expectation of 100% profit within few months right from the
start is dangerous. You could not manage your emotion if your have such
expectation. Greed will take over you. Greed is emotion.
Boy : What shares can I buy with just 10 grands? Presbhd is already
close to 4. I only can buy 2.5 lots the most. With just 2.5 lots, I
cannot earn much even if the share price fly.
UncleZ : You are right and wrong. Right is that just 2.5 lots won't make
a lot of money for you. Wrong is that if it fly, you still good gain in
percentage term. The bottom line is, you are still making money and not
losing money.
Boy : I never thought of that. I am thinking to buy cheap shares because it has higher chance to increase by 100% or 200%.
UncleZ : There is no such thing as cheap stock. The stock market would
not readily wait for you to pick up the cheap stock. There is only
affordable stock but not necessary cheap. For example, a 50 cents stock
is not necessary cheap. In fact, it may be more expensive than a RM5.00
stock in valuation terms. But 50 cents stock is certainly considered an
affordable stock, never mind whether it is expensive or cheap.
Speculators do not differentiate that anyway.
Boy : My brain started to jam already. Any affordable shares to play, oh no, to invest?
UncleZ : Invest in this one. It is only 34 cents. It fits your current
financial situation for investment. Keep for 2 years or atleast a year.
My only worry is, along the way, you may tempted to exit because there
will always be temptation of greener pasture over the other side. But
don't get distracted. Take this as your first investment training
ground. Investment skill is not learnt over night. Anyway, your 10
grands won't get you anywhere if you hop in and out everywhere.
Boy : Alright. Thank you so much. I have one question. DSonic still can buy?
UncleZ : Nahhh..... Not for you. You sure will hop in and hop out the
moment the price recovers. You may make little bit money here and there
but that is all you will get. No point.
The above is more or less our conversation on stock market. Admittedly,
the stock that I mentioned above is not exciting at the moment but I see
values in it in the long run. The company's net gearing is in nett cash
position. ROI is 13%. Its long term prospect remains intact and the
company is also aggressively looking for new overseas market
opportunities. This stock is suitable for those who has the similar
financial situation like my friend's son. I made my very first RM50k
through this way when I started off with my one-and-only capital of just
RM13,500 many many years ago. Along the way I rolled it using the same
principle and before I made my first 100k in two and half years. I could
not afford to speculate stocks every other days because I just don't
have the luck.
Good Luck.
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