Ignore shares and get poorer.

Diary of a private investor: ignore shares and get poorer
Our private investor is back - and he says that savers who are prepared to take some risk will prosper.

Despite the Gulf of Mexico oil spill last year, BP shares are doing well Photo: PA

By James Batholomew

10:51AM BST 06 Jun 2011

After the glorious year of 2010 - for the stock market anyway - this year has, so far, been a damp squib. First it was up, then it relapsed, then it rose once more before retreating again. As I write, it is within 2pc of where it started.

As Lady Bracknell said in The Importance of Being Earnest, "this shilly-shallying is absurd". Which is it to be? Will shares finally rise or fall?

On the bearish side, I'm told, by people who ought to know, that Greece is bust, whatever the politicians say. Another well-placed individual has the same opinion about Ireland.

If either is right, shares could fall heavily on the day the default is announced. Some people say "it is already in the price", but I doubt it.

On the other hand, shares still look good value. I own some in BP which, at 458p, stands at a mere 6.8 times forecast earnings for 2011.

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Its adventures in Russia do worry me a bit and, of course, the shadow of the disaster in the Gulf of Mexico still hangs over it. But rarely in its history have the shares been treated with such disdain.

Professional and lifelong investors are now generally back in the stock market. But many private individuals are still holding back.

Over the past few years, I've talked to quite a few people about their investments and found they can be divided into four sorts.

The first thinks shares are too risky. They remain almost entirely in cash. In some cases they have good reason. Some have a limited amount of money and a very specific thing - such as school fees - which they want to be sure they can pay.

Others argue that shares are unpredictable and they don't know anything about them. Better to keep the money safe in the bank. These people have their reasons. But over the long term, I've seen so many of this sort, who were once well off, become very gradually much less so. I knew the daughter of a Seventies multi-millionaire who inherited her fair share. She kept the money in a building society and is now, frankly, just getting by. It's frustrating. She could have stayed rich.

The second group consists of those who have made quite a bit of money but have not had much time or interest in managing it. They were then persuaded by persistent, charming salesmen to invest in certain funds. For these salesmen, nothing was too much trouble. They visited them in their homes. They brought wonderful, sophisticated brochures and "personalised" recommendations.

The untold story which the salesmen never quite got around to explaining in detail was the full extent of the commissions and expenses involved. The people in this group have generally had a pretty thin time of it over the past dozen years.

The FTSE 100 is still rather lower than it was in January 2000, and all those commissions have eaten a substantial hole in the dividend income.

The third sort are thrill-seekers. To be honest, I know only one person in this group. There was a time when he got very excited about shares and was dealing on an hourly basis, following recommendations from a broker. After initial success, he lost a bundle and decided to give it all up.

Long-term, persistent portfolio investors are the fourth group. They have built up experience and understanding. They tend to have done best.

But where does that leave the sort of person who has other things to do and does not want to spend time building up experience in shares?

My flippant answer would be "poorer". You make your choices and live with the consequences. Trying to be more helpful, let me suggest this: how about putting, say, 15pc of free cash in a selection of lowest-possible-cost tracker funds? And then increasing the amount each year up to a level with which you are comfortable?

This way, you will not give away a fortune in commission. You will keep most of the dividends. You will not have to worry about selecting individual shares. And you are likely - though not guaranteed - to be richer in 10 years than otherwise. You could go for a mixture of, say, half of the invested amount in a FTSE 250 shares fund, a fifth in a Far East fund, another fifth in a US fund and a 10th in an emerging markets fund.

http://www.telegraph.co.uk/finance/personalfinance/investing/shares/8558975/Diary-of-a-private-investor-ignore-shares-and-get-poorer.html

Equity investors: Don't panic!

This week has heralded another sharp sell off in the stock market – but whatever private investors do they must not panic.

When there is a mass sell-off of assets everything falls. Photo: AP

By Garry White

5:02PM GMT 21 Nov 2011

Of course, the situation in Europe is serious – with debt concerns moving from Greece to Italy to Spain and now France. the US deficit is also of serious concern. However, events currently unfolding are not the end of the world. Equity markets are likely to recover from this crisis over the next few years as the global economy improves, but there will be plenty of pain on the way.

When there is a mass sell-off of assets everything falls – the good assets and the bad. Investing is a long term affair and panic selling could means good investments are sold when they are cheap. This defeats the main investment principles of buying low and selling high.

Of course, the value of an asset is only what someone else is prepared to pay for it – so although shares look cheap at the moment they could get cheaper in the short term. However, returns from the stock market over time – particularly when dividends are reinvested – are still likely to mean it is worth staying in the market.

There’s also the fact that panic selling can crystallise tax liabilities to consider.

The truth is, now is actually a great time to buy quality companies at what could be a bargain prices, as long as you have a sensible investment horizon. And are brave enough.  

Invest at the point of maximum pessimism." This is a famous quote from legendary investor John Templeton, who was one of the last century's most successful contrarian investors - hoovering up shares during the Great Depression. He was the founder of fund management group Templeton.

Conversely, the theory goes, you should sell at the point of maximum optimism.

It is important to remember that you will never time a market bottom or market top accurately. That's why Questor thinks the best investment strategy is to continue to drip-feed funds into the market – and this is especially the case when markets are falling.

This strategy is called pound-cost averaging and it makes good sense for investors with an appropriate time frame.

Although the sharp falls seen recently in equities is a concern – it is not a reason to panic. Sell in haste today and you may regret your decision in two year’s time.

http://www.telegraph.co.uk/finance/markets/questor/8904859/Equity-investors-Dont-panic.html

International Stock Markets (52-week performance)

International Stock Markets

• AMERICAS
• EUROPE
• ASIA/PACIFIC
• MIDDLE EAST/AFRICA

Key Indexes	At 8:46 PM ET At least 15-minute delay	Change	% change	1 month	1 year	LowHigh52-week
Nikkei 225 JAPAN	8,314.74	–33.53	–0.40%	–4.20%	–17.80%
Closed for holiday, prices at close 11/22/2011
Hang Seng HONG KONG	17,902.02	–349.57	–1.92%	–0.69%	–21.81%
Shanghai Composite CHINA	2,415.36	+2.74	+0.11%	+4.23%	–14.60%
All Ordinaries AUSTRALIA	4,161.40	–42.77	–1.02%	–1.00%	–11.02%
NSE 50 INDIA	4,812.35	+34.00	+0.71%	–4.70%	–19.93%
At close 9:01 PM ET 11/22/2011
STI SINGAPORE	2,679.55	–37.65	–1.39%	–1.21%	–14.29%
KOSPI KOREA	1,826.28	+6.25	+0.34%	–0.66%	–5.32%
BSE 30 INDIA	16,065.42	+119.32	+0.75%	–4.29%	–19.50%
TSE 50 TAIWAN	4,797.27	–72.82	–1.50%	–3.73%	–16.04%
KLSE Composite MALAYSIA	1,428.63	–9.36	–0.65%	–0.71%	–3.96%

Coming Market Holidays

http://markets.on.nytimes.com/research/markets/worldmarkets/worldmarkets.asp

Warren Buffet's strategy on technical analysis

Warren Buffet's strategy on technical analysis
Apr 05 '00

After much research and experience in investing I've discovered a simple strategy which works very well for profitable investing. It's a composite of Charles Schwab's and Warren Buffet's strategy. As you may know, Warren Buffet started with a little investment decades ago and now he's the third richest man in the world with over $30,000,000,000 in stock in the company he built. Charles Schwab is the genius who began the most successful off-price brokerage in the world. Here's what they say about investing and technical analysis:

Rule number one: Buy a company you'd be willing to hold for a lifetime.

When you put your money in a stock, you become an owner of that firm. You're essentially buying part of it and you reap the profit from the shares you buy in terms of earnings per share. Then the company may pay out those earnings per share in dividends or invest back into the company for growth. Make sure that you're buying a firm that you can depend on, even when the market is down. Investing isn't about the quick in-and-out schemes that lose most day-traders money. That's called gambling. Investing is putting your trust and your resources into a firm which you're willing to commit your hard-earned money to. This leads to my next point.

Rule number two: Ignore technical analysis.

Technical analysis is used to predict whether or not a stock will go up or down in the short term. Some people think that they can ignore the fundamentals of the companies they buy based on technical analysis and end up losing large amounts of money. Yet, no responsible financial advisor would recommend or practice buying based solely or largely on technical analysis. That practice is used for what I defined to be gambling. Essentially relying on technical analysis involves looking at the volume of trading, advances/declines in the share price, and trying to determine whether or not the price will continue upward or reverse. For example, a lot of people buy or sell based on momentum. They jump on the bandwagon or abandon ship with the rest of the crowd. Yet, these fluctuations based on the herd mentality do less for those playing on technical analysis and more for the investor who looks for good value in shares. For, often people selling on technical analysis overshoot and cause a stock's value to be worth less than its fair value. Thanks to people who get burned on these losses, investors find unique opportunities to snatch up great comanies at bargain-basement prices.

Rule number three: Focus on the Fundamentals.

You cannot accurately predict the short term price fluctuations of stocks. Let me repeat myself: You CANNOT accurately predict the short term price fluctuations of stocks. If you could, those stock experts working at Merrill Lynch and Goldman Sachs wouldn't be working. Believe me: they've got a lot more experience than you or I do, and they're not gambling. So, instead of "investing on luck" or momentum, take control and do your research. Find out whether the company is consistantly outpacing the industry. See what the price to earnings ratio is and whether it's being undervalued. Find out whether earnings per share has been increasing or decreasing. See what the financial community thinks by examining analyst opinions covering the firm. All this information is easily accessable over the internet and free of charge. IF you do your homework your gains will be all but certain OVER TIME and you'll feel satisfied and proud with your investment choices. You may even become attached to your company and become well acquainted with it.

Rule number four: Buy long term

Besides your liklihood of making money going up, there are tax advantages to holding stocks long term. For one thing, if you simply hold onto your stock, you won't be taxed until you pull out and your investment can continue to compound, without erosion, until you sell. But, if you constantly buy and sell, then you're taxed on all your gains and you don't get to pay the lower capital gains tax. Instead, it's taxed as regular income, which is a higher tax rate. For most daytraders, tax erosion is one of the biggest problems with making any profit. But, if you do sell make sure it's because your company has been consistently underperforming. This leads to the next point:

Rule number five: Buy low sell high.

Lots of people buy stocks and when the price dips they get scared and sell. Other people see the price of their stock go up and buy more. But, this seems like reverse logic, right? If you own a good company, short-cited investors can drive down a stock price temporarily because of one below-expected earnings report or a bit of bad news. Let these be times for you to take advantage of other people's hysteria and buy at an attractive price.


Be smart in your investment decisions. Warren Buffet didn't find himself where he is today by buying on momentum or following technical analysis. Instead, it took research, patience, and commitment. If you can commit yourself to these same principles, you too will enjoy financial success.

http://www.epinions.com/finc-review-1935-D65AB19-38EAE41E-prod2

Malaysian households are vulnerable to market volatility with one-third of household financial assets in the form of equity,

Private risk in market volatility

Written by Syarina Hyzah Zakaria
Monday, 21 November 2011 12:45


KUALA LUMPUR: Effective this Jan 1, those looking to borrow from banks to buy houses and cars will be subject to Bank Negara Malaysia’s (BNM) new guidelines aimed at promoting prudent, responsible and transparent retail financing practices.

While much has been documented about the high borrowings of Malaysian households, little has been said about the 33% of households’ financial assets that are in the form of equities and unit trusts, which makes them also vulnerable to market volatility.

Malaysia’s high proportion of household debt to GDP of 76% is already a well-known fact. Having targeted the credit card segment earlier by imposing fees and stricter credit limits, the central bank is now tightening the income criteria for mortgages, requiring eligibility to be based on net income rather than gross income as it was previously.

Not only that, effective last Friday the tenure for car loans is now capped at nine years.

Although much has been said about the high level of household borrowings, what do their balance sheets look like?

Earlier this year, BNM published its 2010 Financial Stability and Payment Systems report, highlighting that some 33% of households’ financial assets are in the form of equities and unit trusts, and are susceptible to the performance of the stock market.

Equity holdings and unit trust funds accounted for 17% and 16% respectively of household assets at the end of 2010, with endowment policies accounting for 6%.

Bank deposits form the biggest chunk of household financial assets at 31%, followed by retirement savings with the Employees Provident Fund (EPF) with 30%, and equities 17%.

In fact, equity holdings were at their highest levels since the financial crisis in 2008, recording a 20% change on an annual basis according to the report. This was partly due to the stock market recovery that saw the FBM KLCI gaining 19.34% in 2010. It also contributed to the bulk of the 14.9% expansion in household financial assets last year.

If the high volatility in equity markets persists, it may impinge on a household’s ability to service its debt and mortgages, and inadvertently slow economic growth.


Malaysian households are vulnerable to market volatility as about 33% of their financial assets are in the form of equities and unit trusts.

Equity markets around the world have been on a downhill slide since August, hit by the European debt crisis and a slew of other external concerns. Starting with Standard & Poor’s downgrade of US sovereign debt, worries spread to a possible default by Greece and several other European countries, as well as slowing growth in China and a sluggish recovery in the US.

In August itself, 7.9% or RM97.4 billion was wiped off the KLCI’s market capitalisation, with a further RM69.6 billion erased in September.

Year-to-date, the KLCI has declined 5.15% to 1,454.4 last Friday, and is off an intra-day high of 1,597.08. From the year’s high to the year’s low of 1,310.53 on Sept 26, the index fell 17.9%. The market has since rebounded from the low rising 10.9% to last week’s close.

BNM shared its concern over the stock market’s impact in the report.

“With one-third of household financial assets in the form of equity, households are susceptible to volatile swings in equity prices as observed in 2008, when a 39.3% fall in the KLCI precipitated a decline in household financial assets. This in turn, may subject the household financial position to the vagaries of the equity market.”

In 2008, the value of equity holdings and endowment policies held by households fell by over 35% when the stock market slumped. The value of unit trusts fell over 15% while bank and EPF deposits chalked up modest growth.

However, BNM also said this risk is mitigated by “a substantial and almost equal proportion of household financial assets represented by deposits with financial institutions, which continue to provide a comfortable buffer to support households’ debt servicing ability”.

The central bank added that at the end of 2010, the ratio of financial assets-to-debt remained relatively unchanged at 238.4%, with more than 60% of the financial assets held in the form of highly liquid assets.

Economists contacted by The Edge Financial Daily were not too worried about the impact of the stock market volatility on household assets.

“Investors would have already taken that into consideration when investing,” said Dr Yeah Kim Leng, group chief economist at RAM Holdings.

The current market decline would produce negative wealth effects, but this would be offset by rising income and the rally in commodities prices this year, he said.

“The question now is what is the threshold that would trigger bankruptcy and defaults,” he elaborated. Yeah said the current correction in the markets is not sizable enough to trigger such a situation.

There are other indicators to observe, including employment levels, wage rates and bank credit flows, he said.

“If credit lending for retail and households were impinged, then spending would definitely be cut,” he warned.

Those who invested in the stock market would be the ones with excess savings, he said, adding that households can still depend on fixed income sources such as unit trusts like Amanah Saham Bumiputera and savings deposits which can provide stable returns.

Yeah estimated that the KLCI would have to drop between 30% and 50% from its peak this year to cause any real effects to households.

“This time around, the market is more dominated by institutional investors than retail compared with the 1997 Asian financial crisis. So investors won’t be directly burned by this correction,” said Suhaimi Ilias, an economist at Maybank IB Research.

Suhaimi said: “Unlike back in the 1990s, leveraged equity investments via share margin financing (SMF) were a big thing so individuals were far more vulnerable to market swings due to margin calls and forced selling. As mentioned, this time around household assets related to equity investments are mainly placed under professional fund managers who are better equipped to monitor the investment portfolio and manage risks. Banks are also far more careful in extending SMF these days.

“For that matter, banks are also exercising a great deal of prudence in lending as part of credit risk management, under the close watchful eyes of Bank Negara, which has also been implementing macro prudential measures since late 2010 on mortgages and credit card loan.

“To me, 33% of households invested in equities and unit trusts is not that high a ratio. Moreover, the household financial assets to household debt ratio obviously excludes real assets [such as property holdings] but includes mortgages on the debt side ... so the household assets to debt cover could be higher,” he said.

Nontheless, Suhaimi said a weakening sentiment can affect the real economy as households and consumers turn more cautious in their spending as they react to market news and movements.

“The household assets to debt cover figure is an aggregate statistic, with no breakdown by household income groups, that is high income, middle income, low income,” he added.

“Chances are the lower income households and those working in export-based industries, for example, may be vulnerable due to a lower household assets to debt cover, and from the impact of the global downturn, as what we saw in 2008/09 when many people in the manufacturing sector were retrenched outright or had reduced income due to redundancies or working on shorter shifts,” he said.

“This can lead to difficulties in repaying loans and rising non-performing loans. Back in 2008/09, Bank Negara stepped in to provide temporary relief for the retrenched workers by allowing banks to grant a six-month moratorium on housing loan repayments,” he said.

With high debts and a rising propensity to invest in riskier assets, maintaining near full employment and raising income levels are keys to maintaining households’ financial sustainability.


This article appeared in The Edge Financial Daily, November 21, 2011.

The Four Filters Invention of Warren Buffett and Charlie Munger

Charlie Munger, the Vice Chairman of Berkshire Hathaway mentions their "4 Investing Filters".

1. Understand the Business
2. Sustainable Competitive Advantages
3. Able and Trustworthy Managers
4. Bargain Price = Margin of Safety


"It is a very simple set of ideas and the reason that our idea has not spread faster is that they are too simple."


The QMV or QVM approach:

Q = Quality
M = Management
V = Valuation

Margin of Safety Concept as explained by Warren Buffett

The margin of safety has little to do with price but more to do with the quality of the business (durable competitive advantage and economic moat) and its management.

Buffett:   "In investing in securities, you can change your mind tomorrow and sell it if you feel you have made a mistake. When you buy a business, we buy businesses to keep. So .. our margin of safety is not in the price we pay .. it's in crossing the threshold of being virtually certain of buying into a business with durable competitive advantage, that is, one with good economics ... and we are buying in into people with a passion for the business and who are going to run it in the same way the year after they sold it to us the year that they run it the year before. So our margin of safety gets more into the qualitative characteristics than the quantitative aspects that you probably refer to in terms of the Ben Graham's standard of buying a business for .... he would say buy a stock .. if you think a stock is worth $10 .. don't pay $9.90 for it but $8.00 or something like that. When you are buying businesses, it's a different criteria, you are buying to keep and you better make sure that you are buying both the businesses that you like 10 or 20 years from now and the management that you are going to love 10 or 20 years from now.

We don't look for specific sectors, but we do look at businesses that I can understand. That means where I feel I have a high degree of confidence in my ability to see what they are going to look like 5, 10 and 20 years from now. It isn't that I don't understand, say the software product in general of the Microsoft but I don't know how that industry is going to develop 10 or 20 years. I didn't know that Google was going to come along in terms of search .. and all kind. So, anything that is rapidly developing, has lots of change embodied in it, by my definition, I won't understand. It may do wonders for society. It may have what appears to have a bright future, but I don't bring anything to that game that I know. Not only I don't know more that the other fellow, I do not know as much as the other fellow in evaluating what the industry will look like in 10 years. So, besides the things I look at businesses are reasonably easy to evaluate where the products .. how they will fit in with the economic picture .. how their economics will look in the 5, 10 or 20 years period. (2.40 minute)...Take an extreme example, I can understand Nestle ............................."

The corrosive effect of inflation explained.

"Inflation has turned £100 into less than £20"
One stockbroker explains the corrosive effect of inflation.

The dangers of inflation Photo: Larry Lilac / Alamy

By Paul Killik, senior partner at stockbroker Killik & Co

6:00AM GMT 19 Nov 2011

How would you feel if you bought a security for £100 back in 1971, and it was worth less than £20 today? Unfortunately, if you are over 60 years old, as I am, you will probably have done exactly this, as this is how much the purchasing power of sterling has fallen over this period.

To put it the other way around, had I gone into a supermarket 40 years ago and bought a trolley of goods for £20 and then returned to the supermarket today to buy the same trolley of goods, it would cost me £240.

Inflation is the most insidious investment risk, but its destructive power is frequently ignored by investors and financial regulators alike. There is a tendency to believe that if you save a pound, then, providing you get your pound back, plus a return while you were not using the money, all is well.

Wrong! Money is simply a form of exchange and its true value is determined by what it can purchase, not by its face value.

For the value of your money on deposit to hold its purchasing power, you would have to generate an interest income, after tax, equal to the rate of inflation. Even to a standard-rate taxpayer, that demands a return of 6.25pc with inflation at 5pc. What is more, you can't spend it – you have to save it.

Even over the past five years, from October 2006, the purchasing power of £1 has fallen to 84p.

Where is inflation going from here? The truth is that while short-term inflation can be predicted with some accuracy, and in the short term it is likely to decline as certain known increases of a year ago fall out, no one knows where it is going in the longer term.

There hangs the rub. Many commentators, and I would count myself among them, believe that the level of quantitative easing being undertaken by the Bank of England will result, in the longer term, in further serious – if not hyper – inflation.

In such an environment, monetary assets will decline in purchasing power, while, on the basis of historical precedent, physical assets such as property and shares will maintain their value in real terms.

The conventional wisdom, as one gets older, is to reduce exposure to equities and increase the money on deposit or in fixed income. The risk in this is that we have no idea how long we will live for, but with increasing life expectancy one is potentially exposing oneself to inflation risk for an indeterminate period of time.

Historically, this made sense – as shares generated less than fixed-income securities, so it was logical to go for the higher income and greater certainty. However, today, with the London equity market yielding 4pc after tax, equivalent to 5pc before tax, it is difficult to get an improvement from long-dated fixed-income securities and impossible from gilts or money on deposit.

I would therefore advise a higher equity content for portfolios today and, while I recognise that it is difficult to do so, I would also urge an investor to try to ignore the volatility in capital values, both good and bad, and focus on the dividends.

History tells us that over the years dividends have more or less maintained their purchasing power relative to inflation throughout most of the chaos that the world has thrown at us, and they have done so by steady growth and none of the volatility shown by the equity capital values.

http://www.telegraph.co.uk/finance/personalfinance/investing/8900038/Inflation-has-turned-100-into-less-than-20.html

Chinese rich are keen to emigrate

Chinese rich are keen to emigrate
Updated: 2011-11-03 11:35

By Shi Jing and Yu Ran (China Daily)

SHANGHAI - About 60 percent of the rich Chinese people, each of whom has a net asset of at least 60 million yuan ($9.44 million), said they intended to migrate from China, a report has found.

About 14 percent of them have either already migrated from China or have applied for migration.

The three most favored destinations by the Chinese rich are the United States, Canada and Singapore. The US is the first choice of some 40 percent of the people interviewed, according to a white paper jointly released by Hurun Report and the Bank of China (BOC) on Saturday.

According to US Citizenship and Immigration Services (USCIS), the number of Chinese applicants for investment immigration has exceeded applications from any other country or region.

Last year, the USCIS issued 772 EB-5 visas, meant for investor immigrants, to Chinese people. They account for 41 percent of the total EB-5 visas issued by the agency.

"Among all the destinations in terms of investment immigration, the US always outstand all other options as the country does not impose any quota," said Jiao Lingyan, a client executive of the investment immigration department of the Beijing-based GlobeImmi International Education Consultation Co.

"The minimum amount required for investment immigration to the US is $500,000. But it should be noted that this applies to investments in projects recommended by authorities in the US. People considering these projects should take into account that they may not make profits," Jiao said.

"It is worth noting that the minimum amount for investment immigration will be raised in the coming years, because the number of rich people in China is rapidly growing," she said.

Among the 980 people interviewed by Hurun Report and the BOC, one-third said they have assets overseas, which on an average account for 19 percent of their total assets.

While 32 percent of the interviewees said they have invested overseas with a view to immigrate, half of them said they did so mainly for the sake of their children's education.

Zhang Yuehui, a Beijing-based immigration expert, said children's education is also the top concern among those who want to immigrate.

"A growing number of parents in China have realized that children growing up in the examination-oriented education system in China will find it hard to compete in an increasingly globalized world," Zhang said.

Wang Lilan, 38, a mother of two who immigrated to Australia from her home province of Fujian two years ago, was one of those parents.

"My 12-year-old elder daughter used to do her homework very late into the night. But here in Australia, she does quite a lot practical assignment, in a playful way. And she has more spare time to do the things she likes," Wang said.

"I feel very delighted to see my children having fun while studying," Wang said.

Chinese immigrants are also getting younger, with the largest group aged between 25 and 30, compared to the 40-45 age group in the past, Zhang said

http://www.chinadaily.com.cn/business/2011-11/03/content_14028075.htm

MIS-SELLING STOCKS: "Buying the Dip", "Averaging In" and "Buy and Hold"

Das argues that many expressions used by financial advisers are an attempt to defend bad advice. Cheekily, he puts ''buying the dip'', ''averaging in'' and ''buy and hold'' into this category.

"If you believe that shares only go one way, which is up, then every time they go down, it's a buying opportunity,'' he says. ''If a stock was good value at $10 then it must be cheap at $9 and a bargain at $8. People forget that the lowest it can go is zero."

Averaging-in, or dollar-cost-averaging, is a strategy designed to avoid trying to time the market and investing all your money at the wrong time.

The idea is that by investing small amounts regularly you buy more when prices are low and less when prices are high. Left to their own devices, most people do the opposite.

This works well in a rising market but when prices are falling you simply throw good money after bad and keep fund managers in business.

"The only way out of a hole is to stop digging," Das says.

The buy-and-hold strategy is based on the premise that if you hold a stock long enough it will make money.

This may be true for good quality stocks some of the time but it is not an excuse to nod off at the wheel. Some stocks are lemons and there are times when it pays to reduce your overall exposure to shares and invest in something that provides a better return.

"People forget that after the 1929 crash it took 25 years to recover,'' Das says. ''The Japanese market has never regained its high of 1989."