Investing
Quote of the day:
"In order to make money in the stock market, you have to first get rid of greed and fear."
Don't be greedy to sell at the highest, leave some profits for others to take. And do not be scared to cut your losses.
Sunday, December 20, 2009
Thursday, December 17, 2009
Trading
Two months ago on Oct 9, I keyed in my first stock trade into POEMS, the online trading platform by Phillip Securities. I didn't expect that at the age of 24 with such financial standing, I am able to own a stake in companies which I haven't even seen physically before. Nonetheless, with some knowledge learnt in school, I decided to put it in practice.
Unfortunately for me, I was too eager to multiply my money and took some wrong advice, I bought some lousy stocks. The worse thing was that I thought I was right after doing my own analysis. Luckily, the loss was less than 15% and I am still holding to some today. I think they will be profitable in months to come. I hope I am right.
Now, slightly more than two months later, I upgraded to a more sophisticated financial instrument called Contract for Difference (CFD). The function is the same, just that it gives you leverage. And this trading platform that I am using is able to give me as much as 10 times leverage on my trades.
What is leverage? Leverage is also known as "gearing", which is a term more oftenly used in British context. Imagine a see-saw, but this see-saw is not pivoted in the centre. Instead, it is much nearer to one end. Now you sit on the end nearer to the pivot and it tips. Do you need somemore of the same weight to sit on the other end in order for it to balance? Well, I guess you don't need to go to school for this, just go to the playground and you will get the answer.
Leverage works like this. You use a little bit to get a lot. A leverage of 10 times would mean that $10 of your money can give you $100 of something else. However, it is a double-edged sword. We have to realise that if we spend all the money compared to no leverage, which in other words mean that instead of buying just 1 LV bag that you can afford, you buy 10!! The win/loss is magnified by 10 times. However, it lets you own something that you have never dreamed before, given your financial standing. (On the side note, we know that the example on LV is a lousy one, because there is no win when you buy stupid things like expensive bags)
Indeed, such investments are risky, therefore risk management comes into play. This also means that one has to be disciplined. If you know that you are losing, then you better know when to get out and at what kind of price. For all you know, the stock might never rise to your breakeven price again. Also, with leverage, there is a need to set aside more capital to cushion losses.
On the positive side, most companies are geared in one way or another. They borrow money so they can invest in equipments (input) to produce items that they can sell (output) for a profit. Of course, if people borrow money to use and not to generate profit, that kind of person is really a moron. Not forgetting that you still have to pay interest on the loan.
So, if you want to try your hand at stocks, make sure you choose the right instruments and the right people with the right kind of experience to give you advice. You wouldn't want a big time casino gambler to give you advice, do you?
Your writer here is a trained financial personnel, both in school and financial planning. However, his experience in investments is only limited to two months.
Two months ago on Oct 9, I keyed in my first stock trade into POEMS, the online trading platform by Phillip Securities. I didn't expect that at the age of 24 with such financial standing, I am able to own a stake in companies which I haven't even seen physically before. Nonetheless, with some knowledge learnt in school, I decided to put it in practice.
Unfortunately for me, I was too eager to multiply my money and took some wrong advice, I bought some lousy stocks. The worse thing was that I thought I was right after doing my own analysis. Luckily, the loss was less than 15% and I am still holding to some today. I think they will be profitable in months to come. I hope I am right.
Now, slightly more than two months later, I upgraded to a more sophisticated financial instrument called Contract for Difference (CFD). The function is the same, just that it gives you leverage. And this trading platform that I am using is able to give me as much as 10 times leverage on my trades.
What is leverage? Leverage is also known as "gearing", which is a term more oftenly used in British context. Imagine a see-saw, but this see-saw is not pivoted in the centre. Instead, it is much nearer to one end. Now you sit on the end nearer to the pivot and it tips. Do you need somemore of the same weight to sit on the other end in order for it to balance? Well, I guess you don't need to go to school for this, just go to the playground and you will get the answer.
Leverage works like this. You use a little bit to get a lot. A leverage of 10 times would mean that $10 of your money can give you $100 of something else. However, it is a double-edged sword. We have to realise that if we spend all the money compared to no leverage, which in other words mean that instead of buying just 1 LV bag that you can afford, you buy 10!! The win/loss is magnified by 10 times. However, it lets you own something that you have never dreamed before, given your financial standing. (On the side note, we know that the example on LV is a lousy one, because there is no win when you buy stupid things like expensive bags)
Indeed, such investments are risky, therefore risk management comes into play. This also means that one has to be disciplined. If you know that you are losing, then you better know when to get out and at what kind of price. For all you know, the stock might never rise to your breakeven price again. Also, with leverage, there is a need to set aside more capital to cushion losses.
On the positive side, most companies are geared in one way or another. They borrow money so they can invest in equipments (input) to produce items that they can sell (output) for a profit. Of course, if people borrow money to use and not to generate profit, that kind of person is really a moron. Not forgetting that you still have to pay interest on the loan.
So, if you want to try your hand at stocks, make sure you choose the right instruments and the right people with the right kind of experience to give you advice. You wouldn't want a big time casino gambler to give you advice, do you?
Your writer here is a trained financial personnel, both in school and financial planning. However, his experience in investments is only limited to two months.
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