Learn to Invest in 10 Steps

Learn to Invest in 10 Steps

Learn To Invest In 10 Steps

Investing is actually pretty simple; you're basically putting your money to work for you so that you don't have to take a second job, or work overtime hours to increase your earning potential. There are many different ways to make an investment, such as stocks, bonds, mutual funds or real estate, and they don't always require a large sum of money to start.

Step 1: Get Your Finances In Order

Jumping into investing without first examining your finances is like jumping into the deep end of the pool without knowing how to swim. On top of the cost of living, payments to outstanding credit card balances and loans can eat into the amount of money left to invest. Luckily, investing doesn't require a significant sum to start. Gain more insight in Invest On A Shoestring Budget and Should I Invest Or Reduce Debt?.

Step 2: Learn The Basics

You don't need to be a financial expert to invest, but you do need to learn some basic terminology so that you are better equipped to make informed decisions. Learn the differences between stocks, bonds, mutual funds and certificates of deposit (CDs). You should also learn financial theories such as portfolio optimization, diversification and market efficiency. Reading books written by successful investors such as Warren Buffett or reading through the basic tutorials on Investopedia are great starting points. Get started with our Investing 101 tutorial.(listed below)

Step 3: Set Goals

Once you have established your investing budget and have learned the basics, it's time to set your investing goal. Even though all investors are trying to make money, each one comes from a diverse background and has different needs. Safety of capital, income and capital appreciation are some factors to consider; what is best for you will depend on your age, position in life and personal circumstances. A 35-year-old business executive and a 75-year-old widow will have very different needs. Read more in Basic Investment Objectives and Investing With A Purpose.

Step 4: Determine Your Risk Tolerance

Would a significant drop in your overall investment value make you weak in the knees? Before deciding on which investments are right for you, you need to know how much risk you are willing to assume. Do you love fast cars and the thrill of a risk, or do you prefer reading in your hammock while enjoying the safety of your backyard? Your risk tolerance will vary according to your age, income requirements and financial goals. For more insight read Risk Tolerance Only Tells Half The Story,  Personalizing Risk Tolerance and Determining Risk And The Risk Pyramid.

Step 5: Find Your Investing Style

Now that you know your risk tolerance and goals, what is your investing style? Many first-time investors will find that their goals and risk tolerance will often not match up. For example, if you love fast cars but are looking for safety of capital, you're better off taking a more conservative approach to investing. Conservative investors will generally invest 70-75% of their money in low-risk, fixed-income securities such as Treasury bills, with 15-20% dedicated to blue chip equities. On the other hand, very aggressive investors will generally invest 80-100% of their money in equities. Find your fit in Achieving Optimal Asset Allocation.

Step 6: Learn The Costs

It is equally important to learn the costs of investing, as certain costs can cut into your investment returns. As a whole, passive investing strategies tend to have lower fees than active investing strategies such as trading stocks. Stock brokers charge commissions. For investors starting out with a smaller investment, a discount broker is probably a better choice because they charge a reduced commission. On the other hand, if you are purchasing mutual funds, keep in mind that funds charge various management fees, which is the cost of operating the fund, and some funds charge load fees. Read The Lowdown On No-Load Mutual Funds.

Step 7: Find A Broker Or Advisor

The type of advisor that is right for you depends on the amount of time you are willing to spend on your investments and your risk tolerance. Choosing a financial advisor is a big decision. Factors to consider include their reputation and performance, what designations they hold, how much they plan on communicating with you and what additional services they can offer. For more tips, read Shopping For A Financial Advisor and Picking Your First Broker.

Step 8: Choose Investments

Now comes the fun part: choosing the investments that will become a part of your investment portfolio. If you have a conservative investment style, your portfolio should consist mainly of low-risk, income-producing securities such as federal bonds and money market funds. Key concepts here are asset allocation and diversification. In asset allocation, you are balancing risk and reward by dividing your money between the three asset classes: equities, fixed-income and cash. By diversifying among different asset classes, you avoid the issues associated with putting all of your eggs in one basket. Learn more in A Guide To Portfolio Construction and Introduction To Diversification.

Step 9: Keep Emotions At Bay

Don't let fear or greed limit your returns or inflate your losses. Expect short-term fluctuations in your overall portfolio value. As a long-term investor, these short-term movements should not cause panic. Greed can lead an investor to hold on to a position too long in the hope of an even higher price – even if it falls. Fear can cause an investor to sell an investment too early, or prevent an investor from selling a loser. If your portfolio is keeping you awake at night, it might be best to reconsider your risk tolerance and adopt a more conservative approach. Read When Fear And Greed Take Over  for more.

Step 10: Review and Adjust

The final step in your investing journey is reviewing your portfolio. Once you've established an asset-allocation strategy, you may find that your asset weightings have changed over the course of the year. Why? The market value of the various securities within your portfolio has changed. This can be modified easily through rebalancing. Read more on this topic, and the consequences for ignoring these changes, in Rebalance Your Portfolio To Stay On Track.

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Investing 101: Introduction

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Have you ever wondered how the rich got their wealth and then kept it growing? Do you dream of retiring early (or of being able to retire at all)? Do you know that you should invest, but don't know where to star

If you answered "yes" to any of the above questions, you've come to the right place. In this tutorial we will cover the practice of investing from the ground up. The world of finance can be extremely intimidating, but we firmly believe that the stock market and greater financial world won't seem so complicated once you learn some of the lingo and major concepts. 

We should emphasize, however, that investing isn't a get-rich-quick scheme. Taking control of your personal finances will take work, and, yes, there will be a learning curve. But the rewards will far outweigh the required effort. Contrary to popular belief, you don't have to allow banks, bosses or investment professionals to push your money in directions that you don't understand. After all, no one is in a better position than you are to know what is best for you and your money.

Regardless of your personality type, lifestyle or interests, this tutorial will help you to understand what investing is, what it means and how time earns money through compounding. But it doesn't stop there. This tutorial will also teach you about the building blocks of the investing world and the markets, give you some insight into techniques and strategies and help you think about which investing strategies suit you best. So do yourself a lifelong favor and keep reading.

One last thing: remember: there are no "stupid" questions. If after reading this tutorial you still have unanswered questions, we'd love to hear from you.

Next: Investing 101: What Is Investing?

Table of Contents

1) Investing 101: Introduction

2) Investing 101: What Is Investing?

3) Investing 101: The Concept Of Compounding

4) Investing 101: Knowing Yourself

5) Investing 101: Preparing For Contradictions

6) Investing 101: Types Of Investments

7) Investing 101: Portfolios And Diversification

8) Investing 101: Conclusion

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Warren Buffett's Worst Mistakes

Warren Buffett's Worst Mistakes
by Eric Fontinelle
Monday, February 22, 2010


Warren Buffett is widely regarded as one of the most successful investors of all time. Yet, as Buffett is willing to admit, even the best investors make mistakes. Buffett's legendary annual letters to his Berkshire Hathaway (BRK-A) shareholders tell the tales of his biggest investing mistakes.

There is much to be learned from Buffett's decades of investing experience, so I have selected three of Buffett's biggest mistakes to analyze.

Conoco Phillips

Mistake: Buying at the wrong price

In 2008, Buffett bought a large stake in the stock of Conoco Phillips (COP) as a play on future energy prices. I think many might agree that an increase in oil prices is likely over the long term and that Conoco Phillips will likely benefit. However, this turned out to be a bad investment, because Buffett bought in at too high of a price, resulting in a multibillion-dollar loss to Berkshire. The difference between a great company and a great investment is the price at which you buy stock, and this time around Buffett was "dead wrong." Since crude oil prices were well over $100 a barrel at the time, oil company stocks were way up.


Lesson Learned


It's easy to get swept up in the excitement of big rallies and buy in at a prices that you should not have -- in retrospect. Investors who control their emotions can perform a more objective analysis. A more detached investor might have recognized that the price of crude oil has always exhibited tremendous volatility and that oil companies have long been subject to boom and bust cycles.


Buffett says: "When investing, pessimism is your friend, euphoria the enemy."

U.S. Air

Mistake: Confusing revenue growth with a successful business

Buffett bought preferred stock in U.S. Air (LCC) in 1989 -- no doubt attracted by the high revenue growth it had achieved up until that point. The investment quickly turned sour on Buffett, as U.S. Air did not achieve enough revenues to pay the dividends due on his stock. With luck on his side, Buffett was later able to unload his shares at a profit. Despite this good fortune, Buffett realizes that this investment return was guided by lady luck and the burst of optimism for the industry.


Lesson Learned


As Buffett points out in his 2007 letter to Berkshire shareholders, sometimes businesses look good in terms of revenue growth but require large capital investments all along the way to enable this growth. This is the case with airlines, which generally require additional aircraft to significantly expand revenues. The trouble with these capital-intensive business models is that by the time they achieve a large base of earnings, they are heavily laden with debt. This can leave little left for shareholders and makes the company highly vulnerable to bankruptcy if business declines.


Buffett says: "Investors have poured money into a bottomless pit, attracted by growth when they should have been repelled by it."

Dexter Shoes

Mistake: Investing in a company without a sustainable competitive advantage

In 1993, Buffett bought a shoe company called Dexter Shoes. Buffett's investment in Dexter Shoes turned into a disaster because he saw a durable competitive advantage in Dexter that quickly disappeared. According to Buffett, "What I had assessed as durable competitive advantage vanished within a few years." Buffett claims that this investment was the worst he has ever made, resulting in a loss to shareholders of $3.5 billion.


Lesson Learned


Companies can only earn high profits when they have some sort of a sustainable competitive advantage over other firms in their business area. Wal-Mart (WMT) has incredibly low prices. Honda (HMC) has high-quality vehicles. As long as these companies can deliver on these things better than anyone else, they can maintain high profit margins. If not, the high profits attract many competitors that will slowly eat away at the business and take all the profits for themselves.


Buffett says: "A truly great business must have an enduring "moat" that protects excellent returns on invested capital."

The Bottom Line

While making mistakes with money is always painful, paying a few "school fees" now and then doesn't have to be a total loss. If you analyze your mistakes and learn from them, you might very well make the money back next time. All investors, even Warren Buffett, must acknowledge that mistakes will be made along the way.


Click: Warren Buffett's Worst Mistakes

Read: The Buffett Philosophy

The Buffett Philosophy

Warren Buffett is a proponent of value investing, which looks to find stocks that are undervalued compared to their intrinsic value. Financial metrics like price/book (P/B), price/earnings (P/E), return on equity (ROE) and dividend yield carry the most weight on the Buffett scales. In addition, he seeks out companies that have what he calls "economic moats" - high barriers to entry for a competitor who may wish to invade the market and erode profit margins.

The Bottom Line

There's no shame in being a coattail investor, especially when that coat belongs to Warren Buffett. While all stock investing comes with some risk, a basket of these six stocks is a diversified way to participate in an economy that is by all accounts growing after the worst recession in decades. These market leaders have high barriers to competition, are fairly priced and, regardless of what short-term stock prices say, should deliver long-term value to shareholders. As Buffett himself said, in the short term the market is a voting machine, in the long term, it is a weighing machine. Buffett has an uncanny ability to pick the stocks with the greatest potential for growth, ensuring that the profit scale will always tip in his favor.
   
Baby Buffett Portfolio: His 6 Best Long-Term Picks
Berkshire Hathaway’s 15 Biggest Stock Holdings

****Growth stocks as a class has a striking tendency toward wide swings in market price (II)

The striking thing about growth stocks as a class is their tendency toward wide swings in market price.

But is it not true, that the really big fortunes from common stocks have been garnered by those 

• who made a substantial commitment in the early years of a company in whose future they had great confidence and 
• who held their original shares unwaveringly while they increased 10-fold or 100-fold or more in value?

The answer is "Yes."  

Click to see:
10 Year Price Chart of Top Glove

But the big fortunes from single company investments are almost always realised by persons who have a close relationship with the particular company - through employment, family connection, etc. - which justifies them

• in placing a large part of their resources in one medium and 
• holding on to this commitment through all vicissitudes, despite numerous temptations to sell out at apparently high prices along the way.

Click to see:
5 Year Price Chart of Top Glove
2 Year Price Chart of Top Glove
1 Year Price Chart of Top Glove
6 month Price Chart of Top Glove
3 Month Price Chart of Top Glove
1 Month Price Chart of Top Glove


An investor without such close personal contact will constantly be faced with the question of whether too large a portion of his funds are in this one medium. 

Click to see:
5 Year Price Chart of Top Glove
2 Year Price Chart of Top Glove
1 Year Price Chart of Top Glove
6 month Price Chart of Top Glove
3 Month Price Chart of Top Glove
1 Month Price Chart of Top Glove


Each decline - however temporary it proves in the sequel - will accentuate his problem; and internal and external pressures are likely to force him to take what seems to be a good profit, 


Click to see:
5 Year Price Chart of Top Glove
2 Year Price Chart of Top Glove
1 Year Price Chart of Top Glove
6 month Price Chart of Top Glove
3 Month Price Chart of Top Glove 
1 Month Price Chart of Top Glove 

but one far less than the ultimate bonanza.

Click to see:
10 Year Price Chart of Top Glove



Comments:

1. Be a good stock picker.  
2. Think as a business owner.
3. Always look at value rather than the price.  Do the homework.
4. Buy and hold is alright for selected stocks.
5. Compounding is your friend, get this to work the magic for you.
6. Mr. Market is there to be taken advantage of.  Do not be the sucker instead.  BFS;STS.
7. Always buy a lot when the price is low.  Doing so locks in a higher potential return and minimise the potential loss.  But then, if you have confidence in your stock picking, you would have picked a winner - it is only how much return it will deliver over time.
8. Never buy when the stock is overpriced.  Not observing this rule will result in loss in your investing.  This strategy is critical as it protects against loss.
9. It is alright to buy when the selected stock is at a fair price.
10. Phasing in or dollar cost averaging is safe for such stocks during a downtrend, unless the the price is still obviously too high.
11. Do not time the market for such or any stocks.   Timing can increase returns and similarly harms the returns from your investment. It is impossible to predict the short term volatility of the stock, therefore, it is better to bet on the long-term business prospect of the company which is more predictable. 
12. By keeping to the above strategy, the returns will be delivered through the growth of the company's business. 
13. So, when do you sell the stock?  Almost never, as long as the fundamentals remain sound and the future prospects intact.    
14. The downside risk is protected through only buying when the price is low or fairly priced.  Therefore, when the price is trending downwards and when it is obviously below intrinsic value, do not harm your portfolio by selling to "protect your gains" or "to minimise your loss."  Instead, you should be brave and courageous (this can be very difficult for those not properly wired)  to add more to your portfolio through dollar cost averaging or phasing in your new purchases.  This strategy is very safe for selected high quality stocks as long as you are confident and know your valuation.  It has the same effect of averaging down the cost of your purchase price.  However, unlike selling your shares to do so, buying more below intrinsic value ensures that your money will always be invested to capture the long term returns offered by the business of the selected stock.
15. Tactical dynamic asset allocation or rebalancing based on valuation can be employed but this sounds easier than is practical, except in extreme market situations.  Tactical dynamic asset allocation or rebalancing involves selling at the right price and buying at the right price based on valuation.  Assuming you can get your buying and your selling correct 80% of the time;, to get both of them right for a profitable transaction is only slightly better than chance (80% x 80% = 64%).  Except for the extremes of the market, for most (perhaps, almost all of the time), for such stocks, it is better to stay invested (buy, hold, accumulate more) for the long haul.
16. Sell urgently when the company business fundamental has deteriorated irreversibly. (Reminder:  Transmile)
17. You may also wish to sell  should the growth of the company has obviously slowed and you can reinvest into another company with greater growth potential of similar quality.  However, unlike point 14, you can do so leisurely.
18. In conclusion, a critical key to successful investing is in your stock picking ability.  To be able to do so, you will need to acquire the following skills:

• To formulate an investing philosophy and strategy suitable for your investing time horizon, risk tolerance profile and investment objectives.
• The knowledge to value the business of the company.  
• The discipline to always focus on value.
• The willingness to do your homework diligently.
• A good grasp of behavioural finance to understand your internal and external responses to the price fluctuations of the stock in the stock market.
• A good rational thinking regarding the risks (dangers) and rewards (opportunities) generated by the price fluctuations of the stock in the stock market.

Top Glove Insider action:

Tan Sri Dr. Lim Wee Chai

Disposed 26/1/2007 100,000
Acquired 14/2/2007 34,540,661 (Bonus issue)
Disposed 6/4/2007  6,300,000
Acquired 9/5/2007 1,000,000
Acquired 22/6/2007 500,000
Acquired 12/7/2007 438,900
Acquired 18/7/2007 403,900
Acquired 25/7/2007 157,200
Acquired 12/9/2007 200,000
Acquired 18/9/2007 580,000
Acquired 24/3/2008 50,000
Expiration of ESOS-options 29/4/2008

(The only ESOS-option not converted and expired were those noted on 29/4/2008.  After this date, Mr. Lim continued to convert ESOS-options at regular intervals and did not buy or sell other shares of his company.  The large sale of shares in 6/4/2007 followed the large bonus issue Mr. Lim acquired on 14/2/2007.)

Click to see:
5 Year Price Chart of Top Glove
10 Year Price Chart of Top Glove

From the price chart of Top Glove, we can draw the following points:

The price of Top Glove peaked at around $14 at the beginning of January 2007.
It dropped to around  $9 in February 2007.
In April 2007, the price was around $9.20 when Mr. Lim sold 6,300,000 shares; he did not sell at the highest price possible.
In May 2007, the price was around $8.95, Mr. Lim bought back 1,000,000 shares.
The share price continued dropping to $6.00 in September 2007; Mr. Lim bought back 580,000 shares.
Mr. Lim continued to buy from May 2007 to September 2007 a total of 2.9 million shares.
It was obvious that even Mr. Lim phased-in his buying of the shares at various prices, rather than timing the buying of his shares at the lowest price.

****Growth stocks as a class has a striking tendency toward wide swings in market price (I)

The striking thing about growth stocks as a class is their tendency toward wide swings in market price.


Click to see:
1 Year Price Chart of Top Glove
2 Year Price Chart of Top Glove
5 Year Price Chart of Top Glove



The main characteristic of the stock market in the last few decades has been the injection of a highly speculative element into the shares of companies which have scored the most brilliant successes, and which themselves would be entitled to a high investment rating.  (Their credit standing is of the best, and they pay the lowest interest rates on their borrowings.)

The investment caliber of such a company may not change over a long span of years, but the risk characteristic of its stock will depend on what happens to it in the stock market.

The more enthusiastic the public grows about it, and the faster its advance as compared with the actual growth in its earnings, the riskier a proportion it becomes.

But is it not true, that the really big fortunes come from common stocks that have been garnered by those who made a substantial commitment in the early years of a company in whose future they had great confidence, and who held their original shares unwaveringly while they increased 10-fold or 100-fold or more in value?

Click to see:
10 Year Price Chart of Top Glove

PETRONAS DAGANGAN BHD 19/02/2010

Company Name	:	PETRONAS DAGANGAN BHD
Stock Name	:	PETDAG
Date Announced	:	19/02/2010

Financial Year End	:	31/03/2010
Quarter	:	3
Quarterly report for the financial period ended	:	31/12/2009
The figures	:	have not been audited

SUMMARY OF KEY FINANCIAL INFORMATION

31/12/2009

		INDIVIDUAL PERIOD		CUMULATIVE PERIOD
		CURRENT YEAR QUARTER	PRECEDING YEAR CORRESPONDING QUARTER	CURRENT YEAR TO DATE	PRECEDING YEAR CORRESPONDING PERIOD
		31/12/2009	31/12/2008	31/12/2009	31/12/2008
		$$'000	$$'000	$$'000	$$'000
1	Revenue	5,337,713	5,561,380	15,269,549	19,992,622
2	Profit/(loss) before tax	256,924	68,316	814,905	574,361
3	Profit/(loss) for the period	188,133	43,612	595,059	410,169
4	Profit/(loss) attributable to ordinary equity holders of the parent	187,245	42,471	591,827	406,320
5	Basic earnings/(loss) per share (Subunit)	18.80	4.30	59.60	40.90
6	Proposed/Declared dividend per share (Subunit)	0.00	0.00	0.00	0.00
		AS AT END OF CURRENT QUARTER		AS AT PRECEDING FINANCIAL YEAR END
7	Net assets per share attributable to ordinary equity holders of the parent ($$)	4.4300		4.1900

http://announcements.bursamalaysia.com/EDMS/edmsweb.nsf/ba387758ae37412b482568a300466fb6/5af5967889691a94482576cf00367d7f/$FILE/Announcement%20311209.pdf

Click:
http://spreadsheets.google.com/pub?key=tJWbiwysZm_w2XxUUxHAOeQ&output=html

Dutch Lady posts 4Q net profit of RM16.05m, warns of difficult year

Dutch Lady posts 4Q net profit of RM16.05m, warns of difficult year


Written by The Edge Financial Daily
Thursday, 18 February 2010 20:01
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KUALA LUMPUR: DUTCH LADY MILK INDUSTRIES BHD [] posted net profit of RM16.05 million in the fourth quarter ended Dec 31, 2009, up 16.6% from RM13.76 million a year ago as it benefited from favourable dairy raw material prices and effective marketing activities.

However, the company's board expects a difficult year ahead because of an anticipated increase in dairy raw material prices and increased competition.

It said today revenue rose 2.5% to RM169.52 million from RM165.34 million. Its pre-tax profit rose to RM22.99 million from RM19.24 million. Earnings per share were 25.08 sen versus 21.51 sen. It proposed a final dividend of 10 sen, less 25% income tax, and five sen, tax exempt amounting to a total net dividend of RM 8 million (12.5 sen net per share).

However, profit before taxation for 4Q was lower at RM23 million compared with RM26.9 million in 3Q2009, mainly due to higher advertising and promotions costs and lower selling prices.


http://www.theedgemalaysia.com/business-news/159907-dutch-lady-posts-rm1605m-net-profit-in-4q.html

Only an Idiot Would Buy This Today

Only an Idiot Would Buy This Today

By Tim Hanson
February 11, 2010

Think back to last Thursday at 3:45 p.m. The Snowpocalypse was bearing down on Washington, D.C., and the market was about to close down 3%. It was so bad around here that you'd be forgiven for thinking the end was nigh.

And that was just one more day in a whole season of bad news. What in the name of all that is good and sane in this world should we investors be doing to protect ourselves?

The old standby?
The obvious answer is that as uncertainty spikes, investors seeking peace of mind should flock to lower-risk or even risk-free assets such as Treasuries. These, after all, are backed by the full faith and credit of the U.S. government, and that means something -- or at least, it did 10 years ago. But only an idiot would buy Treasuries today.

In fact, financial supergenius Nassim Nicholas Taleb, of Black Swan fame, recently told a conference in Moscow that "every single human being" should short U.S. treasuries. (If you agree, then Ultrashort 20+ Year Treasury ProShares (NYSE: TBT) is your play.) Taleb cited looming hyperinflation and the inability of the U.S. government to get its spending under control, prospects that eliminate holding plain old dollars as well.

What does Taleb recommend instead? Gold.

Gold?
Only an idiot would buy gold today. The price of that commodity is currently north of $1,000 per ounce, and flirting with new all-time highs on a daily basis. According to billionaire George Soros, gold today is "the ultimate asset bubble."

Given what's happened with the last two ultimate bubbles -- real estate and tech stocks -- it may be best to avoid this one. Recall that if you bought Oracle (Nasdaq: ORCL) or Intel (Nasdaq: INTC) in 2000 or Bank of America (NYSE: BAC) in 2007, you're still down 40% or more.

What about bonds?
Both short- and long-term bonds look like another idiot move. Although bonds tend to offer a regular return and better principal protection than equities, remember that interest rates are near an all-time low. As soon as they revert to the mean, today's bonds, both low- and "high-" yielding issues, will get crushed.

Furthermore, thanks to a risk-averse market, high-quality corporate bonds offer next to nothing in terms of yield. This prompted Forbes to recently declare a "monster bond mutual fund bubble." That sounds even worse than "the ultimate asset bubble."

So … equities?
Master investor David Dreman is bullish on stocks, describing them as good hedge against inflation. But again, the stock market was down near 3% last Thursday, unemployment keeps hovering near 10%, and our country still has to survive significant deleveraging. I've heard from several sources that only an idiot would buy stocks today.

Even Berkshire Hathaway (NYSE: BRK-B), a stalwart if ever there was one, has lost its coveted AAA credit rating. As the last two years have shown, the U.S. stock market is not the place for risk-averse investors.

With the U.S. in trouble, you might look abroad.

• Unfortunately, Europe's situation, with Spain, Portugal, and Greece all struggling to meet their debt obligations, looks worse than our own. 
• As for fast-growing emerging markets, they're all going down as soon as the massive China bubble pops -- as short-seller Jim Chanos has predicted that it will. 
• This, in turn, will take down commodity prices as well, so don't seek safety in oil or food.

Thus, you're only courting double trouble by getting interested in Chinese energy stocks such as PetroChina (NYSE: PTR) or CNOOC (NYSE: CEO). Only an idiot would buy any of those!

Have you noticed there's nothing left?

All told, if you have money to invest, and have spent any time at all reading about the markets, chances are you're panicked. You don't know what to buy (since everything's a bubble), and you don't want to hold cash (since its value will just get inflated away).

This is the perfect illustration of why, when it comes to investing in good times or bad, you can't get caught up in the short term, or in breathless market commentary.

In order to make money in the stock market -- which we all want when we're trying to "protect" our portfolios -- you need take a long-term view, diversify across asset classes, and commit to buying great companies at great prices whenever the market gives you the opportunity. After all, anything has the chance to make you look like an idiot in the short term. But if you stay balanced, stay patient, and stay invested, you'll be in pretty good shape.

Are you any of those things?
That's our view at Motley Fool Global Gains, and we've been tilting our exposure more and more toward emerging markets this year because, while we do expect some volatility, we also expect that emerging markets will be the global economic success story of the next decade.

Furthermore, we recently advised our members that they should consider buying CNOOC -- one of the aforementioned Chinese energy plays -- below $150. That's because the company has increased its production guidance, and it remains a very good way to play the inevitable increase in China's energy demand long-term.

Unfortunately, most U.S. investors remain dramatically underexposed to foreign markets and stocks such as CNOOC -- a vital part of any balanced, long-term, protected portfolio. If that describes you, then get our latest stock recommendations -- including today's two brand-new picks -- by joining Global Gains free for 30 days.


Tim Hanson is co-advisor of Motley Fool Global Gains. Berkshire Hathaway and Intel are Motley Fool Inside Value recommendations. Berkshire Hathaway is a Stock Advisor pick. CNOOC is a Global Gains selection. Motley Fool Options has recommended buying calls on Intel. The Fool owns shares of Berkshire Hathaway and Oracle. The Fool's disclosure policy does not fear the Snowpocalypse, only the Snowmageddon.

http://www.fool.com/features/market-recap/2010/02/11/only-an-idiot-would-buy-this-today.aspx

After Last Year's Stock Rally, Asia Braces for Some Volatility

After Last Year's Stock Rally, Asia Braces for Some Volatility

Heda Bayron | Hong Kong 18 February 2010


Stocks in Asia surged last year, thanks to a massive inflow of capital into the region. But as economies recover, those funds could easily move to seek higher returns elsewhere, creating volatility in the markets.

In recent weeks, Asian stock markets have seen some sharp drops. Hong Kong's Hang Seng index has dropped about seven percent so far this year. Elsewhere in Asia, Japan's Nikkei index and the Shanghai Composite index dropped six percent.

Last year, these markets surged from their lows in late 2008. The Hang Seng index, for instance, ended 2009 up 45 percent.

Garry Evans, head of strategy of HSBC Global Banking and Markets, said in the bank's latest investment commentary that stocks are unlikely to rise the way they did last year.

"The fundamentals of the economy are picking up. What you always have to remember is that the stock market moves in anticipation of that. So the stock market rise last year came down to the fact that the market was anticipating the economy being very good this year," he said.

Stocks last year surged in part because of the stimulus measures governments across the region began to fight the recession and because of low interest rates. Over the past year, billions of dollars in foreign funds flooded into Asia.

But as state spending slows down and as central banks start to tighten credit and raise interest rates, financial experts say investors may move from stocks to other assets, and that could lead to volatility in the stock markets.

Typically, Evans says, stocks suffer sharply during the first round of interest rate increases.

China's central bank says it is important for countries to coordinate stimulus exits because once major developed economies end those programs, capital flows may shift to other assets and economies. And that could mean asset prices, especially in emerging markets like China, may see volatility.

China's curbs on rapid credit growth have triggered selling in Hong Kong's stock market in recent weeks. The territory relied on the mainland's economic stimulus to help it ride out the global slowdown last year.

Hong Kong Monetary Authority Chairman Norman Chan says the city is at risk of capital flight, because more than $82 billion came in over the past year, mostly spent on stocks and property.

"The timing of exit strategy and stability of financial markets, all these will have an impact on the capital flow in the asset markets," said Chan.

Much of the money that flowed into Hong Kong came through stock offerings by Chinese companies. Chan says it will eventually be repatriated to the mainland.

"And therefore such funds would flow out of Hong Kong. But the pressure for capital inflows might persist if equity fund raising remains active and U.S. interest rates remain low," he said.

The danger comes if investors exit the stock market at the same time. But financial analysts say it is unlikely there will be a major disruption because Asia still offers better investment opportunities than do other markets.

Jan Brockmeijer, the deputy director of the monetary and capital markets department of the International Monetary Fund, said a recent briefing that the flow of funds into Asia appears to be "fairly stable." And, he says, not much of it is based on debt or invested in complex, and risky assets.

"The impression we have is that most of it is what they call real money investment and not so much leveraged in nature. That is an important consideration because the extent of leverage to some extent determines also the extent of contagion if markets start reversing," said Brockmeijer.

Many market analysts, such as HSBC's Evans, say investors go to markets where there is still potential for growth, and this year that could be in the U.S. and Britain or in smaller Asian markets like Taiwan.

http://www1.voanews.com/english/news/economy-and-business/After-Last-Years-Stock-Rally-Asia-Braces-for-Some-Volatility-84696092.html

Stock Market Turns Up Its Nose at PIIGS' Woes

Stock Market Turns Up Its Nose at PIIGS' Woes


By THE ASSOCIATED PRESS
Published: February 18, 2010

Filed at 4:15 p.m. ET

BOSTON (AP) -- Greece is a bit player in the global markets. But you've got a recipe for trouble when you add Greece's debt mess to the fiscal failings of the nations known collectively as the PIIGS.

Audrey Kaplan, lead manager of the $704 million Federated InterContinental Fund, tries to keep Greece's small size in mind as she considers the fear that the PIIGS -- Portugal, Ireland, Italy, Greece and Spain -- are sowing in global markets.

For starters, Kaplan notes that the combined market value of a dozen commonly traded Greek stocks is less than half that of Citigroup. And Greece's population of 11 million is less than one-third of California's.

''Perhaps everyone should relax a little bit,'' she says.

Still, Greece matters. That's because the risk of a government default has drawn fresh attention to less-urgent debt troubles elsewhere on the continent -- problems which could balloon if investors anxious over Greece's troubles also flee the other PIIGS countries, raising their borrowing costs.

''The contagion risk is really the issue, rather than Greece itself,'' says Kaplan, whose 20-year career included a stint in Tokyo as an Asian credit crisis unfolded in 1997.

The PIIGS all share slow economies and big deficits. The fear is that those four nations and the 12 other European Union members could see confidence drop in their common currency, the euro. The EU also could be divided by friction over possible single-country bailouts, hurting Europe's economic prospects broadly.

A Greek tragedy isn't yet at hand, but global markets have seen plenty of drama this month. Recent revelations about Greek's economic mismanagement and even faked statistics helped trigger a 4 percent decline in major U.S. market indexes over a weeklong stretch. Markets reversed course and erased the loss after European Union leaders responded with a vague pledge to bail Greece out if needed. Meanwhile, the euro sank to nine-month lows.

If it seems remote to U.S. investors who like to go global, it's not entirely so. About 300 U.S. mutual funds hold more than 5 percent of their portfolios in stocks or bonds from the PIIGS countries, according to a screen by Morningstar Inc.

Kaplan's large-cap fund has no stakes in Portugal, Ireland and Greece, and a minuscule amount in Spain. About 10 percent of its holdings are in Italy, where Kaplan sees lesser debt risks than in the other four.

She's been a manager since 2004 at Federated InterContinental (RIMAX), which ranks among the top 15 percent of its peers based on performance over the past 5- and 10-year periods. Kaplan also helps oversee strategy for Federated's total $2 billion in international stocks.

Here are excerpts from an interview with Kaplan on Greece's debt troubles and the markets' reaction:

------------

Q: Where are the biggest risks in Europe?

A: Greece and Portugal. It's due to government balance sheet mismanagement that has gone on for decades. In the same way that American consumers were spending more than they were saving, the government was doing it in Greece. We've known for a long time about chronic tax evasion among the self-employed in Greece, and about overstaffing and overcompensation among Greek public sector employees. Portugal has many of the same problems.

Q: The government deficit in Greece is 12.7 percent of the nation's annual economic output. That's not much bigger than the U.S. deficit compared with our own gross domestic product. So why are investors so much more worried about Greece's fiscal health?

A: We have the dollar, which remains the reserve currency of the world. And for any number of others reasons -- including our size and stability over time -- markets aren't as worried now about the U.S. deficit.

Q: Where do you put the chances that Greece might be forced out of the European Union if it doesn't get a handle on its debt?

A: Less than 5 percent. It took decades to create the EU, and it's still solid. If Greece were to leave, it would be a bit comparable to California pulling out of the United States because of that state's current budget problems.

Q: Why did the EU signal it would back Greek's debt? When the EU was founded, didn't it adopt a no-bailout policy?

A: The EU nations understand the risks. They can choose to assume the debt commitments of member states to keep the risk from spreading to other countries. Greece's government ministers want to solve this on their own. But to keep the fear from spreading, they're saying they would go against the Maastricht Treaty (the 1992 agreement that established the EU) if necessary.

Q: With Greece and the other PIIGs countries, we're talking about government debt, not corporate debt. Might stocks within those countries be insulated from problems their governments are having?

A: Research shows that's unlikely. If you put two well-diversified international portfolios together, you can expect to see most of the differences in returns result from how each portfolio allocates its holdings among countries, rather than from selection of stocks within those countries. So country selection is the most important factor.

Q: Your fund can buy stocks around the world. How can you gauge risks within countries broadly, and individual companies?

A: Our fund generally holds 150 to 200 stocks, because we recognize there's always a risk of default. We've now got more than 200, so if one stock tanks, the impact on the portfolio overall will be minimal. We're obviously screening out all the indicators we can. But if there's a company intent on misleading investors, then you want to be prepared, and have the proper risk controls in the portfolio.

Q: Which countries offer the best opportunities now for U.S. investors?

A: There are plenty of countries with healthy government finances and good growth prospects. My current favorites include China, South Korea, Norway, Denmark and Switzerland.

http://www.nytimes.com/aponline/2010/02/18/business/AP-US-Of-Mutual-Interest-Greek-Lesson.html?_r=1

Is it possible to have this level of understanding of the stock market?

Is it possible to "figure out" the stock market like geniuses in movies?

The movie "Vitus" features a child-genius that simply understands the stock market and invests about 350,000 dollars of his Grandpa’s money (with his permission) and turns it into over 5 million in a couple days. Is it possible to have this level of understanding of the stock market?

----

Unless you are pump & dumping then its not possible to turn 350k into 5 million in a few days unless you are manipulating the market (which is illegal)

If you wanted to turn 350k into 5 million in a few days, what i would recommend is buying a very thinly traded stock (like 25k shares per day) with a low price that has options to trade. Say the stock costs 5$ per share. Then you would buy maybe 3500 7.50 call options of the same month and that would cost about 122k if your average price was 35 cents. Then once you have the options the price of the stock will rise because people will notice the buying. Then you use the other 225K you have in your account to start buying the stock. You will be able to buy about 45k shares. Now the only problem is you have to hope some computer monitored software program in some hedgefund isnt scanning stocks looking for a pattern like this cause they will know what you are doing and sell into you and sell into you hard. They will put up a short sale wall at 5.50 or 6 dollars and keep dropping the price 10 cents every few minutes, never letting the stock get up to 7.50 and before you know it, this hedge fund has pushed the stock down to 3 bucks per share and you got a margin call.

So is it possible? yes. Is it possible that 1 person can see what you are doing and block you from doing it. YES. The guys with the billion dollar funds are the ones that control the markets which is why you can be the smartest guy in the world and if you are underfunded you cant beat the market with strategys, only with luck.

You really need to have at least a few million to start if you want to pull some kind of strategy like that off.

----

No. The stock market is very intricate and very volatile. A single event can have a tremendous (and unforeseeable) impact on the stock market (wars, a positive/negative announcement by a prominent economic figurehead, etc.). There is no way for people to truly know what will happen.

Investors who make large amounts of dollars playing the stock markets are able to do so because they spend hours upon hours studying various stocks and analyzing growth patterns to determine which stock they should invest in. However, even these people do not claim to have figured out the stock market. You ask any investor, no matter how successful, and they’ll tell you that at one point or another they have lost a sizeable amount of money. The “trick” to their success is knowing stuff like what the company they invested in is going through, if there will be a change in leadership, if the company is doing something different, etc. and then deciding whether or not to hold on to the stock based on that information.

The stock market is really interesting, and I could write a lot about it on here. Each person has their way of playing the stock market, so each person will have a different answer as to how you should go about it. If you’re thinking about getting started, I hear a good place to go to is the Motley Fool; they seem to have good tips and advice.


http://investing.hirby.com/is-it-possible-to-figure-out-the-stock-market-like-geniuses-in-movies/

Be transparent and give the public the facts. The public can make the judgement

Saturday February 20, 2010
Lim: Zahrain would have ruined ‘perfect record’ in stamping out graft

GEORGE TOWN: Chief Minister Lim Guan Eng said Bayan Baru MP Datuk Seri Zahrain Mohd Hashim could have ruined Penang’s “perfect record” in stamping out corruption.

Lim claimed that if the state had gone ahead and approved Zahrain’s request to award a Bukit Jambul Country Club tender to a RM2 private company, it would have become a case for the Malaysian Anti-Corrup-tion Commission (MACC).

“The state did not approve Zahrain’s request to give the tender to this company which was set up just two months before the tender was opened.

“In fact, I believe this company was set up for the sole intention of bidding for this tender.”

He said that since Pakatan Rakyat took over Penang two years ago, there had not been any cases of corruption involving state leaders.

“Of course, we have had reports lodged against us at the MACC, but these reek of lies and a political agenda and none has been found to be true by the commission,” Lim told reporters after attending Pengkalan Kota assemblyman Lau Keng Ee’s Chinese New Year open house at the Gat Lebuh Macallum flats yesterday.

Lim repeated his claim that Zahrain was disappointed when his request was rejected, which then led to his subsequent outbursts against Lim and later, his resignation from PKR.

“We can lose 10 million Zahrains but I will not jeopardise the interest of 1.5 million Penangites,” Lim said.

Zahrain has consistently denied these claims, citing dissatisfaction with Lim’s leadership of Penang as the main reason for quitting PKR.

http://thestar.com.my/news/story.asp?file=/2010/2/20/nation/5713157&sec=nation

Saturday February 20, 2010

Malaysia must catch up to gain high-income status

WITH 2020 only a decade away, Malaysia has a lot of catching up to do if it is to become a high-income economy.
This was the message conveyed by several prominent speakers at the recent 1Malaysia Economic Conference in Kuala Lumpur.
Malaysia’s new economic model, which will be the backbone of the 10th and 11th Malaysia Plans, is expected to accelerate the country’s progress into the next decade to ensure the success of Vision 2020.
According to the World Bank, a high-income economy is one with a gross national income per capita of US$12,000 and above.
Datuk Noriyah Ahmad, director-general of the Economic Planning Unit in the Prime Minister’s Department, said Malaysia recorded relatively slower economic growth from 2000 to 2008 compared with the 1990–1997 period.

“The country’s gross domestic product growth from 2000 to 2008 averaged around 5.5% compared with 9.1% from 1990 to 1997.

“Malaysia has not caught up with the high-income economies and if the trend continues, we may be overtaken by other rapidly developing economies,” she said.
In addition, the country’s private investments also need to be revitalised as savings exceed investment by a significant amount largely due to a collapse in private investment.

“Our workforce today is also relatively unskilled with 80% educated up to Sijil Pelajaran Malaysia level or its equivalent, and only 25% of Malaysian jobs are in the higher skill category,” she said.

Noriyah said Malaysia still had a long journey ahead as its gross national product (GNP) per capita stood at US$6,686 in 2007 and was projected to hit US$15,340 in 2020, only marginally above the minimum GNP benchmark of US$14,818 for high-income countries.
Going forward, she said the Government has taken new steps in development planning, with the introduction of a two-year rolling plan under the 10th Malaysia Plan (10MP).
“Other measures in the 10MP will come from the private sector which is expected to be the engine of growth.

“We have come a long way from being an agro-based to a service and manufacturing-oriented economy. But this model is already outdated, hence the new approach under the 10MP,” she said.

On a short-term perspective, Universiti Sains Malaysia pro-chancellor Tan Sri Dr Lin See-Yan said there were several areas that needed to be addressed.
“Wide-ranging private business initiatives are needed to lead sustainable recovery and not direct consumption. Unlike China, our consumers favour spending once permanent income is forthcoming. Business confidence must be nurtured where stimulus is still needed until recovery is secured,” he said.

He said the Government’s role remained to facilitate the continuing flow of private investments, where priority is to bring about demand, a visionary transportation infrastructure and modern utilities to support new growth areas.

“There is a talent war out there. The global market for talent is highly competitive,” he said, adding that the new green agenda also needed urgent attention as well.
“Being green or environmentally friendly is not an option. We have to re-invent and expand green stimulus elements that include energy efficiency and renewables, mass transit, smart electricity grid, finance and reforestation,” he said.
From a private sector perspective, Association for Shopping Complex and High-Rise Management president Joyce Yap expects the new economic model to further promote the retail industry.
“The retail industry is the second largest contributor to tourism expenditure and supports 204,000 employees.
“Thus, it is important to continue developing Malaysia as a prominent shopping destination in this region; to be comparable with countries like Singapore and Hong Kong,” she said.
Yap recommended that the Government crafts consistent and long-term policies to encourage domestic spending and market Malaysia abroad.

 http://biz.thestar.com.my/news/story.asp?file=/2010/2/20/business/5662945&sec=business

'There are now good long-term opportunities'

'There are now good long-term opportunities'
Q&A: Navneet Munot, Chief Investment Officer, SBI Mutual Fund
Chandan Kishore Kant / Mumbai February 12, 2010, 0:02 IST

Navneet MunotNavneet Munot, chief investment officer, SBI Mutual Fund, manages around Rs 37,000 crore in assets, half of it equity. He spoke to Chandan Kishore Kant on the outlook for the stock market this year, the sectors he likes and his expectation from the Union Budget. Edited excerpts:

How do you view the recent correction in equity markets?

The recent fall is on the back of weak global cues. There are fears related to sovereign balance sheets of countries such as Greece and Spain. The recovery in global markets was primarily due to policy stimulus and a large part of the leverage that is in private balance sheets as well as balance sheets of the household sector. This has been shifted to sovereign balance sheets, which is one concern that market participants have. These fears have materialised in the past couple of days and impacted our markets.

The other big event will be the Union Budget, where we expect some part of the stimulus to be withdrawn. The market is looking at that fear as well.

Will last fortnight’s volatility continue for long?

The volatility was driven largely by global factors, not domestic ones. This uncertainty will probably continue for some more time. The Europe factor may weigh on market sentiment before we see a final resolution.

What are your expectations from the Budget?

There’s a realisation within the government that there is a need to go back to fiscal consolidation and, at the same time, continue some stimulus till we see private investments and private consumption gather steam. We can expect an increase in excise duties on some items and in the service tax rate. Some of the fiscal measures in the last Budget might be withdrawn.

But, of course, it will be done gradually, as there is a need to balance fiscal consolidation and keeping the recovery process undisturbed. Disinvestment could be another big theme.

If all of this comes true, how will the markets behave?

Overall, the economy is doing well. Corporate earnings are expected to grow 18-20 per cent and valuations are fair. The equity markets will reflect earnings growth further next year. Our belief is that from here on, markets should consolidate at these levels. We have seen an expansion in multiples. With the correction we have seen in recent days, the shares are fairly valued and I do not think valuations are stretched now. There is value in some pockets of the market.

In this situation, what will be your investment strategy?

Broadly, our focus will be on individual stock-picking. That’s what we believe in, generating high alpha for the next year or so. The market is expected to consolidate and may gradually move upwards. Year 2010 will be one of consolidation. We are not that benchmark-driven. The whole idea is to find good companies which can generate good wealth over time. So, we focus more on bottom-up stock-picking rather than broader sectoral calls.

Which sectors are you bullish on?

Infrastructure and domestic consumption are two broad themes. In sectors such as IT (information technology) and healthcare, there are good companies trading at reasonable valuations.

What is your cash level?

Between 2 per cent and 7 per cent, which means we are more than 90 per cent invested.

But, at times when we see less opportunities, we might increase our cash levels. As of now, that's not the view. After this correction, there are good opportunities for the long-term.

Don't you see redemption pressure?

No. We believe that mutual funds will start receiving inflows from retail investors in the next few months. Though there have been outflows from equity schemes, I guess the trend will change in the next month or two and we will see inflows.

http://www.business-standard.com/india/news/%5Ctherenow-good-long-term-opportunities%5C/385412/

Growth Stocks and the Defensive Investor

The term 'growth stock' is applied to one which has increased its per-share earnings in the past at well above the rate for common stocks generally and is expected to continue to do so in the future.

Some authorities would say that a true growth stock should be expected at least to double its per-share earnings in 10 years, that is, to increase them at a compound annual rate of over 7.1%.

Obviously stocks of this kind are attractive to buy and to own, provided the price paid is not excessive.

The problem lies there, of course, since growth stocks have long sold at high prices in relation to current earnings and at much higher multiples of their average profits over a past period. This has introduced a speculative element of considerable weight in the growth stock picture and has made successful operations in this field a far from simple matter.

In the past, the "best of common stocks" actually lost 50% of its market price in a 6 months' market decline.

Other growth stocks have been even more vulnerable to adverse development; in some cases not only has the price fallen back but the earnings as well, thus causing a double discomfiture for those who owned them.

For example, a particular stock price advanced 5 times (from $5 to $256 i.e 50x) as fast as the profits (from 40 cents to $3.91 per share i.e. 10x); this is characteristic of popular common stocks. Two years later, the earnings had dropped off by nearly 50% and the price by 80%.

For growth stocks, wonders can be accomplished with

• the right individual selections, 
• bought at the right levels, and
• later sold after a huge rise and 
• before the probable decline.

But the average investor can no more expect to accomplish this. In contrast, Benjamin Graham think that  the group of large companies that are 

• relatively unpopular and 
• therefore obtainable at reasonable earnings multipliers, 
• offers a sound if unspectacular area of choice by the general public.

Ref:
Intelligent Investor
by Benjamin Graham

Happy Chinese New Year to All

Individual investor should focus on absolute returns from their investment.

The fund manager tends to benchmark the return of the fund to an index. However, for the individual investor, it is better to focus on absolute return on their investment. Their first priority, of course, is not to lose money.

It is not difficult for the average investor to get a modest absolute return from the stock market consistently over a long period. Through careful selection of only a few stocks, this is easily achievable.

However, the investors, with better knowledge, skills and the willingness to spend time doing the homework, can hope to better this modest absolute rate of return consistently over a long period.

The returns are volatile over the short term. However, over the long term, the returns will reflect the fundamentals of the invested companies. Adopting the simple strategy of investing in good quality companies bought at bargain or reasonable price, the absolute returns over the long term should predictably and hopefully be positive.

Those with the ability to sense or value the overall market can employ tactical dynamic rebalancing in their portfolio management. They can allocate a bigger percentage to equity when the reward/risk ratio is more favourable during the depth of the bear market and by investing less into equity when the reward/risk ratio is less favourable during the height of the bull market. This strategy reduces the risk of big losses during a bear market. Implementing this strategy will be challenging and can only benefit those with good rational understanding of the valuation of the overall market.

Why do people lose money in the stock market?

Graham defined investment thus: "An INVESTMENT OPERATION is one which, upon THOROUGH ANALYSIS, promises SAFETY OF PRINCIPAL and a SATISFACTORY RETURN. Operations NOT meeting these requirements are speculative."

Maybe these people are gambling or speculating rather than investing. Perhaps, they thought they are investing when in fact, by Graham's definition, they are gambling or speculating.


(Absolute return, Relative return, Short term, Long term)

Trading Beginner Lesson 1 Introduction

http://commoditytraders.paktaitoday.com/trading-beginner-lesson-1-introduction/

Greek crisis: the eurozone in numbers

As the eurozone grapples with its worst internal economic tensions since its birth 11 years ago, we chart the areas market movements and macroeconomic trends.
1) Eurozone debt shares and spreads over German bonds.

http://www.telegraph.co.uk/finance/economics/7206100/Greek-crisis-the-eurozone-in-numbers.html