Keep Investing Simple and Safe (KISS)

Keep Investing Simple and Safe

When is the best time to buy share?

Anytime really. You should track a list of high quality stocks. Buy when the stock is selling at a bargain price, that is, when the risk of losing your capital is low or negligible and the return substantially higher. The good investors aim for high returns with minimal risk taking.

Is there a time when you should not be buying any stocks?

1. Generally, when the market is trading at a high valuation. There is always another time to buy the stock. Be patient.

2. However, if you are not knowledgeable in stock selection (QVM) and money management, you should not be investing directly in the stock market. You are better buying a mutual fund when the market is trading at low valuation or to park your fund with a personal fund manager. The stock market is a dangerous place for the uninitiated.

3. Avoid investing money in the stock if the money you invested may be needed urgently anytime or in a short time. Investing in the market should be for the longer term. There is too much uncertainties in the returns over a short time frame.

Is now a good time to buy stocks?

Anytime is a good time to buy stock.

Rather than timing the market, one should buy or sell base on the price of the stock offered by the market. Even in the peak of the bull market, one can pick up some bargains. Of course, in the depth of a bear market, there are many good stocks selling at very low prices.

Is buy and hold, a safe strategy?

The recent severe downturn in the market brought this strategy into question once again. It is very safe for those who employs this strategy using certain criterias. It is safe for selected stocks. These stocks should be of the highest quality (QVM). These stocks should be bought at a bargain price with a margin of safety. The only time you may have to sell the stock urgently is when there is a fundamental deterioration in the business of the company. Other than this, you have the leisure of selling.

The market is cyclical. The bull-bear-bull-bear cycles ensure that the bull will always follows a bear and vice-versa. Here are a selection of Malaysian stocks that have stood the test of time over at least 3 severe bear markets: Nestle, DLady, Petdag, Guinness, Petgas, PBB, PPB, Resorts. There are also others too. At certain short period of time, each of these stocks may underperform but if assessed over a longer period of time, the returns have ALL been positive. By minimising the downside and aiming only for modest returns, investing can be surprisingly rewarding for a large number of investors and with little effort.

How to maximise returns?

1. First, ensure that there is safety of your capital. Remember not to lose your capital. By ensuring that you do not lose money and aiming for moderate returns, you can maximise total returns too with low risk. Don't be greedy for high returns by taking unnecessarily high risks.

2. Stick to the few high quality stocks you are familiar with. This is the circle of competence mentioned by Buffett. Stay within your circle of competence and never, never, never, never, get out of this circle. :-) If your circle of competence is only 6 stocks, stick to these 6 stocks.

3. Only buy high quality stocks at bargain price. At a certain price, the stock is a bargain and at another price, it is trading at a fair price. Never, never, never buy these high quality stocks when it is trading at high price. By buying these good quality stocks at a bargain price, one is buying with a margin of safety to minimise loss to your capital in the event you got it wrong. At the same time, if the event turned out to be as you expected, your return will be greater.

4. Also do not over-diversify. According to Buffett, adding the 7th stock into your portfolio reduces the overall return of your portfolio. Bet big if you are very certain of your selection.

5. Allow the wonder of compounding to grow your return over a long period of time.

Investing can be very safe. Keep it simple and safe. (K.I.S.S.)