Posts Tagged ‘investment strategy’
Cash Is King
Cash is the King
by: Kendrick Chua, the Wealth Warrior
We all have heard this statement; more so when the market started going south last year. Investors were cashing in at any level desperately wanting to salvage whatever value there is. If that’s Lehman Brothers, forget about it! After all, cash itself proved more valuable than the shares of the stocks. (even the stock certificate may even be more valuable than the stock itself).
And so cash was hailed as the king…yet again. This investment achieved such status when all other asset classes failed.
How do we define cash? Cash includes all the coins and bills you have in possession including money you hid under the mattress when you feared the bank-runs last year. Cash also includes all money in your savings and checking account as well as placements in short term time deposits. In short, it is money that will not decline in value given a normal market condition (inflation risk excluded).
So what are the advantages of holding cash? Cash provides:
Tags: cash, investment strategy
Prudent Fund Management versus Aggressive Asset Allocation
Prudent Fund Management versus Aggressive Asset Allocation
by: Kendrick Chua, the Wealth Warrior
Investment philosophy can only be either of the two things: Conservative or Aggressive. I don’t believe in being neutral. You can’t.
Of course, each of this philosophy has its own pros and cons and none can claim it is the best strategy there is. We should all know by now that there is none.
Prudent as the more politically correct word as our fund managers says, is more practical in a bear market. Being prudent meant holding large amount of cash or selecting only the bluest of the blue chip stocks. That way, when the fund goes down (further), the funds would not be greatly affected since a significant portion is invested in cash. Fixed-income is another option.
Additionally, there will be ammunition to buy select issues at bargain prices. Since there will be no need to sell losses just to raise cash.
The Investing Emotions
The Investing Emotions
by Kendrick Chua. The Wealth Warrior
We all witnessed what happened last year and it was nothing we would like once again. The saying, “once is enough, twice is too much” holds very true to the stock market crash in the US as well as the Philippines.
The cycle of investing emotions is a very interesting diagram. It presents a roller-coaster scenario of our emotions and this held true. Imagine if I had sold at the Point of Maximum Risk and bought a the Point of Maximum Opportunity, I’d be retiring in Bahamas by now.
But unfortunately, I didn’t know and neither could have anybody. Even if there were some gurus that proclaimed what catastrophe we would all be facing, I doubt they were heed upon. The human emotions on this matter are just too overwhelming even for our own sake.
In investing, managing the risk utmost priority. Yes, rising stock prices (or NAVPS) elicit elation and excitement. Who wouldn’t? I still clearly remember 2007 when my mom and I greet each other by asking how the stock market performed that day. Those were the days…
But then suddenly, everything just went on a falling spree and the point at which everyone should have sold, suddenly found themselves buying more, myself included. And now the tides have turned and investors were left gasping. It’s true, at the beginning it is just anxiety, denial, then the fear turns to panic, depression and despondency. Eventually, when everything seemed to be going nowhere, stock prices suddenly goes jumping and again similar to this year.
The rally is quite impressive-33% in less than 6 months. The question in everyone’s mind if this is just a dead cat bouncing, bear market rally or a serious bull contender (we use lots of animal metaphors).
Your guess is as good as mine but rather than speculating whether the rally has enough gas or not, it is better to muster our own emotions (read The 7 Deadly Sins of Financial Planning). The worst investors always buy at the peak and sell at the trough and that’s why they are called the worst.
The best heed the wise advice of the Oracle of Omaha, Be greedy when the others are fearful and be fearful when others are greedy. Question is, did we or are we regretting at this point why we did not do some shopping last month or we did not listen to the advice of our financial advisors?
But before you jump in once again, remember to control your emotions. Use your logic instead for this one and you just might come out on top.
Tags: investment strategy
Protect Your Money: Avoid these 5 Investing Pitfalls
Protect Your Money: Avoid these 5 Investing Pitfalls.
by: Kendrick Chua
No investor has been spared from losses in his entire life. Even the legendary Warren Buffett has had losses only they were not as publicized furiously as his successes.
Your money is a product of your hard-work that is often accompanied by your sweat, tears and blood. It is but natural for you to guard it against forces out to take it. In my short period of time as an investor and trader, I had my own fair share of investing mistakes and I’d like to share them to your readers lest you make them as well.
Tags: investment strategy
Investing the Buffett Way
Investing the Buffett Way
by: Kendrick Chua
Warren Buffett has long been deemed a sage in the financial market. His investing approach and strategy made him a legend, making him the second richest man (and once the richest man) in the world with over $50,000,000,000. To put things in perspective, the total debt of our country is only $5billion more than what he is worth and pretty soon, he himself can literally wipe it out if he so chooses. He has the figures to prove that, unlike the 2004 presidentiable-turned-nuisance candidate-turned recording artist, Eddie Gil (wonder where he is now).
Just what made him the greatest investor the world has ever known? Or to simplify the question, what does he know that all of us don’t? So much has been dedicated in studying his methodology and approach that people who learn from Buffett coined themselves, Buffettologists or the study of Warren Buffett.
What is Warren Buffett’s way? James Pardoe in his book, How Buffett Does It, offered 24 “simple investing strategies”. Wading through all the information can be overloading, I’ll attempt to select only the most important. (more…)
Peso Cost Averaging: Does it work or not?
Peso Cost-Averaging: Does it work or not?
by: Kendrick Chua
You have just made your first purchase on stocks yesterday and excited as you are to check your portfolio, you discovered that the Dow Jones Industrial Average just dropped 777points last night-it’s single biggest decline in history. That itself won’t kill you but the local market following suit will.
True enough, your stocks just went on a downward spiral with no end in sight. Nervous as you are, you were prepared for this situation and thought of buying some more while it is getting “cheaper”. After all, didn’t the “experts” say that it is now time to buy? You rationalized this for a moment and remembered an article that Buffett is now buying. Your logic is telling you to take the plunge but your gut thinks otherwise. What do you do now? (more…)
Tags: investment strategy
