The Age of Buy and Hold Is Over?

Based on various feedback, this is a mixed view. Some say the age of "buy and hold" stocks and/or equity related investments is simply over, simply due to the fact that economy and business are cyclical in nature. For instance, many stocks (even the bluest of blue chips) effectively wiped out the entire gains made during the last 10 years in just one year of global economic crisis last year!

On the other hand, others say that adopting the "buy and hold" strategy is the best strategy to investing as it is not possible to time the market in terms of peaks and troughs.

Personally for me, the "buy and hold" strategy will not work at turbulent times like this as every single company 's market share will be severely affected by sentiment. Instead of "buy and hold", the likely apprroach during such time in fact is "dump first, think later"! The objective of course, is capital preservation.

However, the strategy of "buy and hold" may make sense during market bull rally. For instance, US market went through a 5 year up trend from 1995 to 1999, followed by from Year 2003 to 2007. Notice that market went through a 3 year correction from year 2000 to year 2002. Assuming the stock price performance is correlated to the index, it would be wise to take some profit during initial market downtrend instead of waiting out for the unknown.

Year 2007 to date performance is a classic example where things really turn nasty! For those who hold on to their investments, chances are the entire gain built up over the last 10 years or so may be wiped off completely! Is it worth while to continue with the gung ho approach then?

So the question is how do you tell the market is undergoing bullish trend or bearish trend then?

Answer lies with Technical Analysis. As technical chartists often say, the charts do not lie! Mind you, technical charts are no crystal ball! They serve the purpose of serving a strategic or tactical guide, based on market "psychology" which will be reflected in the chart. As one say, the Trend is your Friend! Do not fight against the trend when it comes to trading or Investing! Tonnes of hard earned gains accumulated over the years could well be wiped off in an instant!

At the end of day, trade or invest with the trend rather than fighting it. One may not be able to time the market perfectly but at the minimum invest with proper risk management in place is the key to long term success.

Similarly, one needs to know when to cash out when the trend changes. No point be the hero. After all, IT'S YOUR MONEY!

How To Predict Stock Market Movement Using Currency

Most traders use technical analysis to make a prediction the likely movement of stock market. For most layman, learning up technical analysis takes time and a fair amount of patience and technical interest. For most, they simply give up.

There is one other way of making advance predictions of stock market movement, and based on my observation, the correlation between the two is a pretty good one.

Take currency versus US Dollar comparison. When US Dollar gains strength against other currency, stock market will likely go down. On the contrary, the exact opposite movement (market rises) happens when US Dollar depreciates against other currency.

Take the following two examples (USD vs Ringgit and USD vs Singapore Dollar) to study the correlation:



Do you see the opposite trend being formed? It may not be the most perfect correlation but generally, it holds true.

To explain this, generally speaking it is a case of US Dollar demand is stronger during rising risk aversion (i.e., funds are risk averse to investing overseas and therefore more funds are repatriated to U.S.). On the other hand, US Dollar demand will be weakened when funds are more eager to invest overseas, thus outflow of funds from U.S.)

So if you would like to predict the day's market movement, study the currency strength versus US Dollar.

How To Invest At A Point of Maximum Pessimism

Want to know how to invest at the point of maximum pessimism (given current stock market's doldrums)? Below is an experts' view on investing techniques at current market pessimism and where Malaysia stands from both economic and technical perspective.

The live interview was conducted by TheStar newspaper on 20th February 2009. This video may be a tad back-dated but the interviewees certainly gave a full-hearted and frank opinion on current business and market conditions, and sharing good ideas on investing for better future returns.

Here's the video. Enjoy.

Has Calm Been Finally Restored?

Stocks rallied worldwide this week after China cut borrowing costs by the most in 11 years and the Federal Reserve’s pledge to buy $600 billion of debt sent mortgage rates down by the most in at least seven years.

On the other hand, Citigroup has jumped 87% since the U.S. government injected $20 billion of capital into the bank at the start of the week and guaranteed $306 billion of its mortgages and other troubled loans.

More than $30 trillion has been wiped off the value of global equities this year as credit losses and writedowns approached $1 trillion in the worst financial crisis since the Great Depression.

The question remains, have we reached the bottom?

Past year's trend tells us that we should not get overly optimistic yet, as any signs of recovery could well be merely a bear trap!

Here is one of the key observation I made, that is, Down Jones Industrial Index is still trading within a bearish descending triangle. It is now at a critical cross road, that is, the next few days or weeks could potentially derail again all the positive development that has been established over the last one week! Technically speaking, the signs are pointing to a likely major bottom again!

I am holding on the same view until it proves me otherwise...

Automate Trading Strategy and Trade Stocks For Free, Anyone?

Anyone interested to automate his or her trading strategy and trade stocks for FREE? It may sound too good to be true but this is REAL!

Whilst online trading is nothing new in Malaysia, the momentum for online trading has picked up tremendously over the past couple of years, as investors are better informed of its advantages and the increasing penetration of internet usage across the country. First of all, the brokerage commission for online trading is lower compared to the conventional trading method of having to contact one's remisier over the telephone. It provides ease and convenience to traders and investors from the comfort of their homes or anywhere (with an internet access) for that matter. Couple with the common availability of wireless internet access in public areas particularly cafes, there is no question that this brings to an increase of trading velocity in the local stock market.

However, this poses a problem. There seems to be a major disconnect between traders and stock brokers. Personally, this is how i feel as I seldom have to contact my remisier, other than seeking some specific technical advice. Besides, my investment decisions are based purely on my own research findings and judgement, as I do not rely on hot TIPS from my broker! So, it appears that having a broker is quite redundant for many! Well, not quite i would say. This is because by virtue of having an online account, investors also have access to all the research materials and resources from the broker. These information are valuable for savvy investors to conduct their own research and keeping up-to-date with the latest information on both companies and economic development.

However, while the above is deem valuable, all the stock brokers are providing roughly the same services....or in another words, short of INNOVATION! I would say the only differentiator is probably the quality of the research materials vis-vis the other.

A positive change has happened recently...One of Malaysia's leading stock broker, RHB Investment Bank, has revolutionized the way investors trade their stocks. Besides offering the usual services mentioned above, they have offered an additional platform for their customers to base their investment decisions using a guided technical trading strategy, called RHB Analyzer. Instead of just giving you a bunch of technical charts, this system is able to screen through thousands of stocks and enable one to trade particular stocks based on a particular chosen trading strategy. In essence, the system automates trading strategy! This could save investors/traders a lot of time having to conduct extensive technical analysis on their own. Besides, it is extremely useful for investors / traders who have little or no knowledge of technical analysis!

How to trade stocks for FREE? Well, for those who sign up for this system before 30th April 2008, you are entitled to 3 FREE trades, absolutely COMMISSION FREE!

Personally i find this trading strategy effective and is very easy to use. For complete information, please visit RHB Investment Bank.

I should also qualify that I am not an agent to RHB or anyway related to them. So you should always exercise your discretion in choosing to use this system.