The three “Nos” of Investing in the Stock Market

Some of you who know me know that I am an avid toastmaster and I will be participating in a humorous speech contest tomorrow. Below is the draft of my speech (copyrighted by PG 2007) which I thought while being humorous, it also has some value as an investment article.

I'd thought I'll post it for a change.

Be well and prosper!

==========Humourous Speech by PanzerGrenadier=======================

OPENING

How many of you gamble/opps/invest or own shares in the stock market?

[Raise my own right hand]?

I can see that there are many gamblers...opps... [pause] investors here... !

Did you know that one-in-three or 1.3 million people subscribed for Singtel shares in 1993? So turn to the person to your left and right and congratulate them if they still held on to their Singtel shares. And if you had sold out early, pass them a tissue for their tears for the lost profits!

BODY

Mr Contest Chair, honourable judges, fellow toastmasters, ladies and gentlemen

A stock market is a place where fortunes are made and lost all in the blink of hours, minutes and even seconds! It is a place where you can make money and it is a place where you lose money and sometimes all in the same day!

I am going to share with you the three “knows” on how you can not only survive the bulls, the bears but even thrive in any stock market environment.

KNOW YOUR ENEMIES

This is the first thing that you need to know! Forget the technical terms such as price-earnings ratio, forget dividend yields and profit margins and most of all forget analysts reports.

You first need to know these two powerful enemies who whisper into your ears all the time when you are investing in the stock market.

Let me introduce to you, the best and the worst characters you will meet in your investing life, please give your applause to Missssssssttttteeeeeeerrrrrr :

FEAR and …………….. misssssssttttttteeeeeeerrrrrrrrr GREED: [lead the audience in applause!]

Why fear?

Besides death and taxes, all of us fear... TO LOSE MONEY! Hence, we have to understand our emotion of fear that strikes us everytime we make decisions to buy/sell or hold because we have to overcome this fear of losing money when we sell as the market goes lower and lower.

Why greed!

Because all of us are want to have … [pause] MORE – MONEY, PROFITS, WEALTH through investing.

How many of you have ever bought low, sold high and wished you had sold higher?

How many of you have ever sold high, bought back low and wished you bought back even lower?

How many of us still wished to have known to held on to our singtel shares until now?

All of us do!

Knowing your enemies is not enough, we need to also :

KNOW THE MARKET

After knowing yourself, you need to know the market, i.e. the underlying factors that affect the share prices.

How do people analyse the market? There are fundamentally two ways:

FA = Fundamental Analysis or for brevity we will call it "FA" where you analyse the economic factors such as growth of economy, rises of falls in production, consumer price index, interest rates and exchange rates

TA = Technical Analysis or "TA" where you analyse the price movements and volume of shares using statistical methods and models in order to determine when is the right price to buy/sell or hold.

If you combine FA (?)and TA(?) = ?? grow or prosper or in the hokkien dialect we call it HUAT!

KNOW YOUR INVESTMENT OBJECTIVES

Knowing yourself and your market is not enough... You need to know your investment objectives .... so that you know how much profit or loss is ENOUGH!

If you have no specific investment objective e.g. get a return of 10% on your money invested, then your decisions to buy/sell/hold are all done without any reference to a benchmark. So how would you know if you are doing good, or that you should be doing better or you have done your best?

CONCLUSION
To recap, before you start to invest in the stock market, remember the 3 knows!

1) Know your enemies – fear and greed

2) Know the market

3) Know your investment objectives

Above all, to paraphrase Confucius,

Know what you know in investing and know what you know not. That is true knowledge.

Be well and prosper!

Mr. Contest Chair.