My Investment Experience
by Gan Hong Leong
“Investment is most intelligent when it is most businesslike.” Benjamin Graham, widely known as the father of value investing, taught Warren Buffet this philosophy. Based on this wisdom, Warren Buffet invested in the stock market. Today he is the second richest man in the world. Learn from him, learn from his success, and you too can become rich.
The stock market was virtually a virgin jungle to me when I bought my first share. That was in 1960, and I was 21. At that time, I was as naïve and ignorant as a schoolboy regarding stocks and shares. So long as the price was low I would call it cheap. Undervalued stocks, fairly-priced stocks, or overvalued stocks are all the same to me. The chaff and the grains have no difference.
However, I was lucky to insist that the stocks which I bought must give good dividend yield. Buying shares o a cum-dividend basis was my preference. I would sell whenever I had a good capital gain of more than 50%. I continued to invest in that manner which turned out to be profitable. Little did I realised, I was actually buying fundamentally sound stocks at fairly low prices. My investment strategy was businesslike.
In April 1993, the Malaysian stock market had a super bull run. From a low of 645 points, the KLSE Composite Index hit its all time high of 1332. Speculation was rampant. Price rise was spectacular. The market was a hive of activities. To get a seat to watch the market in the broker firm, you need to cue up as early as 7:30 a.m.! In every corner of the town, people were talking about the market. There were no losers. Everyone was a winner. I sold at the later stage of the bull market and made a windfall. By February, 1997 the value of my portfolio appreciated to RM3,000,000 from RM48,000 about 20 years ago. However, I was still none the wiser about the stock market.
The years 1997 and 1998 were traumatic. The KLSE Composite Index was at 1279 in February, 1997. I bought the shares of an investment holding company listed on the main board and the share price was around RM15 per share in early 1997. By August 1997, it had declined to RM7.70 per share.
After I bought some at that price, the price kept on declining. Against the principle of wise investing, I started averaging down whenever there was a small decline. By November 1997, it had declined to RM1.83. I thought it would stop there. Alas! It was not to be. The price continued to decline. By August 1998, it reached a low of 40.5 sen per share.
Meanwhile, my portfolio depreciated from RM3,000,000 to a mere RM50,000. Suddenly, I realised that buying in a downtrend and holding on to a falling stock was extreme stupidity. “Never catch a falling dagger!” became my favourite phrase.
After the introduction of capital control in Malaysia in September 1998, the country slowly nursed back to health. By then, I had become smarter, having learned fundamental and technical analysis. My investment was starting to become intelligent and more businesslike.
In April 2001, I started to accumulate some stocks based on fundamentals. I chose company that had excellent management and great potential for growth. If it pays good dividends and the company was undervalued, I held on to the shares. By September 2003, the stocks that I had bought had appreciated and together with the dividends received, I got another windfall.
Words of Advice
For all stock market investors and speculators out there, here is my advice:
Value for money you must insist.
Buying in a downtrend you must resist.
The trend is your friend.
Follow it to the very end.
Holding on to a falling stock is unwise.
Cut your loses quickly is advised.
Never kill the golden goose when you have one.
Never sell prematurely, let it run for once.
Undervalued unpopular stock is never a fancy.
Glamour stock is the choice normally.
Join the crowd; enjoy the ride, if you wish.
Be careful though, lest you fall out and vanish.
The market is most tempting at the top.
Lock in your profit before volume has a good drop.
Sell your stocks when you love them most.
Take your money & let the deal be closed.
Buy when volume traded is at its lowest.
The market will then be at its dullest.
Investors should buy low and sell high.
Traders should buy high and sell higher.
Some day you will know what I mean.
By then, you are a stock market dean.
Success in any field requires your labour. The stock market is no exception. To be successful, ensure that you have the knowledge and wisdom to plan your strategies, the discipline to carry out your plans, the patience to wait, the perseverance and temperament to endure, the capital to implement, and above all, the will to win. Incidentally, these are traits of a successful businessman; hence, the usefulness of Graham’s advice.
Investment in knowledge pays the best dividends. I share this philosophy.
Disclaimer: The views and opinions expressed in this article are strictly those of the author.
Securities Industry Development Corporation (SIDC) organised an essay writing competition titled My Investment Experience with the objective of getting investors to share their investment experience, good or bad. We present you, the winning essay by Gan Hong Leong from Bentong, Pahang.
http://www.min.com.my/index.php?option=com_content&view=article&id=63
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