Capital Gain vs Cash Flow

When it comes to making a decision on investing, would you choose one based on the criteria of capital gain or cash flow? It's a tough one, isn't it? Frankly, the answer varies from person to person. However, i would say that for most ordinary people, they would prefer capital gain.

Let's quote an example, suppose you purchase an asset for x amount of dollar and sold it for a nice 40% gain in 3 years, versus you purchase an asset for the same amount that gives you say 8% annual return in the form of dividend or rental for instance, and the asset only appreciates less than 5% a year. For most people, they would probably go for the first example, where higher capital gain is made. After all, it sounds more convincing and exciting when you tell your friends or business partners that you have pocketed handsomely in this deal!

Question is, what do you do with the money gained thereafter? Most commonly, there is always a lurking temptation to spend on luxury items when you have spare cash in hand, be it a luxury holiday, fancy car, watches, etc. After all, why wouldn't you want to pamper yourself a "little" for closing a wonderful deal! Nothing wrong with pampering yourself sometimes (good way to recharge the batteries!), but it's the quantum of spending unecessarily that you would want to take caution of. Bear in mind, spending unnecessarily means you are giving away an opportunity to make money work for you in the future!

On the other hand, can you find another opportunity that can give you similarly good financial returns after this? Chances are you may not. So you will end up with plenty of cash on hand and as time passes, the temptation to spend grows!

For me personally, although short term capital gain sounds sweet and exciting, there is no guarantee that a particular investment will yield the expected capital gain. Therefore the risk increases. On the other hand, human nature to spend unnecessarily is also a lurking danger. On the contrary, an investment that can generate a regular streams of income (cash flow) is perceived to be lower risk and helps to sustain your own personal financial position in the longer term. To take one step further, go for investments which generate positive cash flows.

Positive cash flow simply refers to the excess regular income generated by an asset after deducting all the relevant expenses in deriving the particular income. A good example is property rental income where the tenant will pay the property owner rental every month as long as the property remains tenanted.

A good point of comparison is between landed property and rental yield property such as high rise residential apartment. Landed property has bigger potential for capital gain (but not guaranteed) but poor rental yield. That means extra burden having to regularly service the commitment from your own pocket and opportunity cost! On the contrary, good high rise apartment may not generate as high capital gain but gives much better return when it comes to rental yield. In this case, the tenant will finance your property but the property is still owned by you!

A long lasting positive cash flow will help a person or a business to survive and sustain longer, without the need to continuously spend more money and therefore sacrificing other opportunities. As you build more businesses or acquire assets that generate positive cash flows over time, you will find that you have truly gained the ultimate goal of financial freedom!

Nevertheless, that doesn't mean you should ignore capital gain all together! Why not the best of both worlds? According to Robert Kiyosaki, the key to financial intelligence is how to use both cash flow and capital gains to grow wealthy. So many people are not successful, because they’re generally focusing on only one of the two.

Options Trading For Beginners

Due to the current financial and economic crisis in U.S., I have started evaluating some stocks in the U.S. Before 2008, trading in U.S. stocks would certainly require deep pockets, particularly for myself due to my country's unfavourable exchange rates ($1 to RM3.5 on average). Never in my life could I imagine stocks in U.S. could one day be trading at such low prices! eg., financial giant like Citigroup trading below $1? GE trading below $6? There are many other examples, such as General Motors and AIG. Then of course, these stocks were trading at such low levels due to their own respective unprecedented crisis!

So I started putting some money into U.S. stocks and thankfully, i made some decent gains in a short period of time. Having a solid trading plan knowing when to enter and exit was the critical success factor. By the way, adopting buy and hold strategy no longer works these days in my opinion, due to the volatile nature of markets and frankly, no one knows for sure whether the markets have bottomed. So why take on the risk of hitting the unknown?

Precisely. But here's a problem. Investing in U.S. stocks means that I will still need to pump in a sizeable amount of money to trade (bearing in mind my unfavourable exchange rate)! There comes to my mind options trading which I had heard so many times before but have very little knowledge of. Options trading utilises the power of leveraging on stocks and is a very powerful form of derivative instrument. So powerful that even Mr. Warren Buffett is fearful of (as he recently criticised as one of the major cause of stock market crash).

As I recalled, I had contemplated to learn options trading in June last year but I dropped the notion because I was not ready then (Please refer to my archived post entitled "Do I Need Options"). Now I believe I am ready to explore this new frontier (new, at least for me...) and to uncover it's perceived power of leveraging and to unlock the myth of successful options trading.

Haven't attended numerous previews of Options Trading learning courses in the past and feedback from numerous ex-students and friends who ventured into options trading, I was certainly skeptical on which Options Trading trainer or course would actually deliver the goods. My attempted research through the internet was of little benefit too as no website content would reveal satisfactory practical knowledge on options trading. Finally, I had little choice but to take a calculated gamble by learning from a fee-based course.

Next I shall reveal which course I have selected and my ground up review.

Warren Buffett's Words of Wisdom for 2009

Here's a special message from the one of the wealthiest man on earth and is worth your time reading and taking notes....It's simple yet powerful and meaningful.

"We begin this New Year with dampened enthusiasm and dented optimism. Our happiness is diluted and our peace is threatened by the financial illness that has infected our families, organisations and nations. Everyone is desperate to find a remedy that will cure their financial illness and help them recover their financial health.

They expect the financial experts to provide them with remedies, forgetting the fact that it is these experts who created this financial mess.

Every new year, I adopt a couple of old maxims as my beacons to guide my future. This self-prescribed therapy has ensured that with each passing year, I grow wiser and not older. This year, I invite you to tap into the financial wisdom of our elders along with me, and become financially wiser.

Spending: If you buy things you don't need, you'll soon sell things you need.

Savings: Don't save what is left after spending; spend what is left after saving.

Hard work: All hard work brings profit; but mere talk leads only to poverty.

Laziness: A sleeping lobster is carried away by the water current.

Earnings: Never depend on a single source of income.

Borrowings: The borrower becomes the lender's slave.

Accounting: It's no use carrying an umbrella, if your shoes are leaking.

Auditing: Beware of little expenses; a small leak can sink a large ship.

Risk-taking: Never test the depth of the river with both feet.

Investment: Don't put all your eggs in one basket.

I'm certain that those who have already been practicing these principles remain financially healthy.

I'm equally confident that those who resolve to start practicing these principles will quickly regain their financial health.

Let us become wiser and lead a happy, healthy, prosperous and peaceful life."

- Warren Buffet

Beware Of The High Yield Trap

Many analysts and advisers have been recommending high dividend yield stocks as one of the most effective and defensive instrument against the current beaten down and volatile markets. The principal to follow here is that as long as you are buying or holding on to stocks that continues to distribute decent percentage of dividend on an annual basis, you are assured of receiving at least a decent amount of dividend income, as a cushion against the possible slide in share prices.

The dividend yield is calculated as the amount of dividend per share against the share price. The projected yield is therefore taking into account the future projected earnings and the average dividend distribution ratio. Instances where companies are committed to a certain percentage of their net earnings as dividend distribution augurs well for such defensive strategy.

However, beware of the earning trap, before you jump out of the bandwagon and start collecting high yield stocks!

Technically, as every country is experiencing recession or severe economic slowdown, so will the corporate earnings! This is inevitable as business and consumer confidence will surely take a hit, whether one likes it or not. In some cases, business could be driven down by slower and lesser demand, thus driving them out of business. In most cases, people could well be taking a more cautious or "wait-and-see" approach, thus limit spending. Bnnks on the other hand, are more likely to take a cautious approach to lending, although liquidity may still be abundant. This literally reduces credit availability in the market and ultimately increases cost of borrowing. All-in-all, business and consumer spending sentiment will be affected.

As the above takes place over a period of time, it remains to be seen the degree of severity of the business downturn. As you can see now, more of more companies are reporting lower than expected corporate earnings recently.

As such, one has to review carefully the forecasted earnings of companies before taking the defensive high yielding approach. When the chips are down, do not be surprised that companies may actually declare lower dividends or even cancel them altogether in order to preserve cash (for rainy days)!

Look out for companies that are least affected by the economic slowdown and consistently payout dividends through rain or shine. Companies in the utility sector (such as power generator) may be one of them.

It's Time To Think About The Future

A piece of advice for investors who have little time to monitor market's daily movement, don't know much about technical analysis, but appreciate long term value and can look beyond the present crisis....

Buy low, sell high...Sure, it sounded simple but in reality, no one can truly predict when is the low or lowest! So, instead of trying to time the market at perfection and fear for losing the plot, let's look at an alternative approach where you can better manage risks and emotions.

For many, it is often hard to think about the world in the next five years from now. It is even harder to think about things that have yet to happen. Still, decisions with your investments should depend on future potential instead of what is happening now and in the past.

A long-term perspective means looking at the potential for your asset in the next five-years. If so, then don’t panic if you have not exited the market earlier and your portfolio is down.

Time to do some reshuffling (asset reallocation) and do not hesitate to chop down the dead woods. If you have wrongly invested in certain assets, cut the losses and shift the funds to the ones with the highest potential for recovery and value growth over the next five years.

Bear in mind, markets react in anticipation of the actual event. As such, you just can't wait to enter the market only until the economy has recovered. On average, markets will react six months in advance of actual. Therefore, it is a calculated risk. For example, if you believe that the global economy will turn better in the second half of 2009, 1st quarter of 2008 may well be the major turning point.

Dollar-cost Averaging is one technique where you can look at to consistently accumulate promising assets going forward. Set aside a certain percentage of your income and keep to the discipline by investing the money on a regular basis (common is monthly). However, make sure the money you set aside are not meant for emergency purposes and is relatively free from emotion, in case you have to bear some short term losses in the event the asset value goes lower.

Remember this, abundance of wealth can be best created during crisis! Now is not the time to feel sorry but to look ahead for opportunities!

Five Personality Tips To Better Your Investment

First Tip: Save Money
Many people come to me and tell me that they have no money to invest. So i ask, " Do you spend money on buying unnecessary items each month?" Most responded by saying they do. Here lies the problem. People mindset are naturally tuned to spend but not to save!

Keep a diary of what you plan to spend versus the actual spending for each month. Make sure you spend within budget and only on necessities. If need be, you may also budget not more than 5% to 10% of your income on entertainment or something to pamper yourself each month. What's left over should be kept as savings. At the minimum, the savings should be at least 10% of your income.

Do not think the amount of savings is too small to begin with. Let's just say $200 a month. This will accumulate to $2,400 a year! Multiply that with compound interest year on year and you will get the picture...

2nd Tip: Invest Only Money You Can Afford To Lose
Try not to invest money that are to be used for emergency purposes or other purposes such as your children tertiary education fund! Reason is because this kind of funds tend to attract plenty of emotions during investing, i.e., one simply can't afford to lose it! Remember, one of the most fundamental rule of thumb in investing is that one must be able to control his or her own emotions. Emotions tend to lead to poor decision making and panic state!

That does not mean you absolutely can't invest your emergency funds. First and foremost, you should classify the risk profiling associated with the type of funds you have, prior to investing. You may place funds that have the lowest risk profile into cash instrument such as Fixed Deposit or capital guaranteed mutual fund or unit trust. Choosing the latter has the advantage in the sense that you have a chance to see the money grow but at the same time capital is guaranteed. However, bear in mind you should expect a lower rate of return for such capital guaranteed instrument.

3rd Tip: Invest Comfortably
One should adopt a systematic approach to investing, particularly for investments such as equity, derivative or currency. The key is model after what other successful traders have done, emulate their trading style and follow a systematic approach. Eliminate as much as possible the element of GREED, FEAR AND EMOTIONS from your investments so that investing is enjoyable and least stressful.

Where applicable, try adapting a particular trading style to suit your own needs and practice. However, bear in mind you should never deviate too far away from the successful trading principles and make sure the adaptations must make sense and workable.

4th Tip: Invest In What You Know Best and Stick To It!
In a nutshell, don't be a Jack of all trade and master of none! Given there are so many investment instruments out there, choose only the ones you know best and focus in perfecting your investment technique.

Trust me, it's easy to always think that the grass on the other side is always greener but the reality is that it's seldom true! When something work against you, don't just give up and jump onto another bandwagon! After all, there are so many instruments out there where you can invest, be it equity, derivative, bond, currency trading, various types of commodities, wine, etc.

Always find out the reasons for failure and learn from it. Don't simply give up!

5th Tip: Stay Current
Stay current and be up-to-date with latest happening, trends, economy and industry development. Knowing the latest trends will help you to unearth the next potential boom or burst! You can achieve this by reading the latest books or publications, attend workshops or seminars, or even through sharing with friends and peers.

It's Time To Be Greedy When Others Are Fearful?

The Master of value investing has to be no other than Warren Buffett himself. A couple of days ago, he made a personal call to suggest that now is the time to invest in the banished equity market. For the faithful fans of Warren Buffett, his statement carries a lot of weight and influence. Below is an extract of Warren's statement.

The financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.

So ... I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.

Why?

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.

A little history here: During the Depression, the Dow hit its low, 41, on July 8, 1932. Economic conditions, though, kept deteriorating until Franklin D. Roosevelt took office in March 1933. By that time, the market had already advanced 30 percent. Or think back to the early days of World War II, when things were going badly for the United States in Europe and the Pacific. The market hit bottom in April 1942, well before Allied fortunes turned. Again, in the early 1980s, the time to buy stocks was when inflation raged and the economy was in the tank. In short, bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.

Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.

You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy.

Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts. |

Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”

I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: “Put your mouth where your money was.” Today my money and my mouth both say equities."

For the original article, please visit this link.

In the past, there were at least 2 similar calls made by Warren. Following his first call in year 1974, the Dow Jones Industrial Average and the S&P 500 soared by 86% and 70%, respectively, over the next two years. His second call came in 1979 and two year after that, the S&P achieved an annualized return of 17.3%, nearly twice the average 9.6% return for bonds.

Is It Important To Time The Market?

For a long term type of investor such as Warren Buffett, timing the market does not appear to hold much degree of significance. After all, this type of investor believes that an undervalued company (coupled with solid fundamentals, management, etc) will find its feet ultimately and investors will "recognize" its value one day. This group of investors are generally seen as the minority group, as most of the others generally prefer to go for short-term or medium-term type of investment. For this majority, they will most likely argue that timing the market is of utmost significance. After all, catching a falling knife is likely to hurt one, badly!

So, who is right, who is wrong?

Most long term investors will argue that volatility in equity prices is an inherent part of investing. It takes courage, discipline and foresight to remain invested in the market, especially when the urge to avoid financial pain is strong. Investors may be prone to sell in a volatile market because they think they can wait until the market settles lower and go back in when the market starts to recover. This strategy seems to make common sense". However, the problem with this strategy is that they may miss their chances of missing the major market movements that signal the start of a longer recovery. Many of these major upside moves can happen quickly, often in just a few days.

Interestingly, a study conducted by a local asset management group on Malaysia's equity market (KLCI) has the following analysis.

• Missing five of the best trading days results in negative returns of 17.39%.
• Missing the 10 best trading days and the loss almost triples to 49.13%.
• Missing the 30 best trading days and the loss soars to 83.07%. This represents just 30 days out of approximately 3,807 trading days in total, or merely 0.79% of the total trading days
• An investor who remained invested throughout the last 15 years enjoyed returns of 82.25 per cent.

Nevertheless, how about if we assume an investor manages to avoid the worst trading days? The results of the study reveals the following:

• Remaining invested through- out the last 15 years gives returns of 82.25 %.
• Avoiding just the five worst trading days results in positive returns of 260.15%.
• Avoid the 10 worst trading days and the gain jumps to 413.62%.
• Avoid the 50 worst trading days and the returns are a phenomenal 3,266.59 %.

The results are far better than than the first scenario. However, the most fundamental question is whether the investor is able to have the foresight and timing to perfection to avoid those worst trading days? Quite likely, the answer is No, likewise no one is able to aim buying at the cheapest price!

Does this mean that investors should never attempt to time the market at all and buy at whatever time, even if the market is expected to sink further?

Certainly not.

In my view, first and foremost, we need to understand that timing the market does not equate to trying to mark an entry at the best possible pricing. It just means a way to minimize one's risk or what we call risk management. The best way of gauging the timing of the entry is by using tools such as technical analysis, i.e., enter the market only when there is an appropriate buying signal. Sceptics will argue that technical analysis is no crystal ball. It may be true somewhat but the key here is risk management. By using technical analysis, one can reduce the risk of getting it wrong. Why invest when the market has shown little sign of recovery or a sustainable recovery? Catching a falling knife can hurt the most! The current global crisis is the best case of example. Cheap stock prices and undervalued companies are aplenty, but when sentiment is against you, no fundamental holds as fear factor will over power any positive mindset!

In addition, it may also take years before the market recovers. For instance, the Dot Com burst in Year 2001 took around 2 to 3 years for full market recovery.

While it may appear sensible for investors with plenty of cash to just ignore the timing, buy and then put aside without ever looking at if for several years, many investors are simply not in the same league financially. The fact is many investors also do not possess the right emotional state to handle large amount of paper losses.

As such, the "safest" route for many, is still timing.

"Its not about being right or wrong, rather, its about how much money you make when you're right and how much you don't lose when you're wrong" - Quote by George Soros

However, for those who are not active investors, perhaps leaving it to the professionals may be the better option. However, be prepared to see your investment values erode as market will most likely not recover so soon.

For more details on the study, please click this link.

Switching to Cash May Feel Safe, but Risks Remain

Amidst the current global market weakness and the downward spiral performance of most asset classes, many people have advocated keeping cash as the best form of capital preservation. Recently I came across an interesting article that discusses the wisdom of liquidating one's investments and keeping cash. This article was written by Ron Lieber from The New York Times.

"It’s a question we’ve all asked in our darker moments of late: Why not just put all of our investments in cash, 100 percent, just for a little while, until things calm down?

Some people already seem to be acting on that instinct. In the first six days of October (through Monday), investors pulled $19 billion out of mutual funds that invest in United States stocks, matching the outflows for the entire month of September, according to TrimTabs Investment Research.

“What clients are looking for is safety,” said John Bunch, president of retail distribution at TD Ameritrade. “They are seeking solutions that are backed by the federal government. Specifically, F.D.I.C-insured money funds and certificates of deposit. All of it is under the umbrella of, ‘Am I safe and insured?’ ”

By fleeing for the comfort of safe and insured, however, investors with a time horizon beyond a few years may be doing real damage to their long-term finances. If you’re tempted to make a big move to cash right now, you’re doing something called market timing. It’s an implied statement that you’ve figured out the right moment to get out of stocks — and will also know the right time to get back in.

So let’s dispense with the first part straightaway. The right time to move out of stocks was a year or so ago, before various stock indexes the world over fell by one-third or more.

If you missed that opportunity, you’re hardly alone.

But if you sell now, you’ll be locking in your losses. And once you’re in cash, there isn’t much upside. In fact, with interest rates low, you’re likely to lose money in cash, because inflation will probably eat up the after-tax returns you earn from a savings or money-market account.

A guarantee of a small loss may sound good right now. But if you’re not bailing out of stocks once and for all, how will you know when it’s time to get back in? The fact is, any peace of mind you gain by being on the sidelines now will turn into a migraine once you see how much you can harm your portfolio over time by missing just a bit of any rebound.

H. Nejat Seyhun, a professor of finance at the Ross School of Business at the University of Michigan, put together a study in 2005 for Towneley Capital Management, where he tested the long-term damage that investors could do to their portfolios if they missed out on the small percentage of days when the stock market experienced big gains.

From 1963 to 2004, the index of American stocks he tested gained 10.84 percent annually in a geometric average, which avoided overstating the true performance. For people who missed the 90 biggest-gaining days in that period, however, the annual return fell to just 3.2 percent. Less than 1 percent of the trading days accounted for 96 percent of the market gains.

This fall, Javier Estrada, a professor of finance at IESE Business School in Barcelona, published a similar study in The Journal of Investing that looked at equity markets in 15 nations, including the United States. A portfolio belonging to an investor who missed the 10 best days over several decades across all of those markets would end up, on average, with about half the balance of someone who sat tight throughout.

So moving to cash right now is just fine as long as you know precisely when to get back into stocks (even though you didn’t know when to get out of them).

At some point, stocks will indeed fall enough that investors will remove the money from their mattresses and put it to work, causing prices to rise significantly. But, as Bonnie A. Hughes, a certified financial planner with the Enrichment Group in Miami, put it to me, there won’t be an e-mail message or news release that goes out when this is about to happen. It will be evident only afterward, on the few days when the market surges.

And it gets worse for those who think they won’t have any trouble investing in stocks again later. Medium- or long-term investors who are considering a big move into cash right now are probably making an emotional decision, at least in part. For those who follow through, the same instincts will probably hurt when trying to figure out when to reinvest in stocks.

“The emotional forces that drove them out of the market aren’t likely to let them back in ‘until things are better,’ ” Dan Danford of the Family Investment Center in St. Joseph, Mo., said in an e-mail message. “And for most people, things won’t feel better again until the market has already moved back up.” In fact, he added, plenty of people may not allow themselves to get back in until the market has already risen significantly. "

Do you agree with the views posted on this article?

For the full article, please read on this link.

When Nothing Else Matters, Gold Does!

Gold has long been perceived by many to be a long term investment safe heaven. Some even think that the timing in buying gold is not important, as the metal always tend to appreciate in value over time, especially when all else fails.

Yesterday was a classic example where the price of gold shot up by a whopping 10% in one day, due to investors switching to this piece of classic metal as a result of the worsening global investment climate triggered by the worsening US Financial crisis and credit crunch! A number of high profile takeovers and bankruptcies in the U.S. have certainly caught the attention of global investors in terms of guessing which financial institution may be the next to fall from grace! So instead of putting up with the risks, the theme of yesterday's sentiment appeared to be "liquidate first, decide later". Which explains why global markets (led by Down Jones) had another free fall yesterday.

Nevertheless, bear in mind that the price of gold has fallen by around 25% from mid July 2008 to about USD740/ounce recently. It is no coincidence that gold prices dipped after the recent major correction of crude oil prices and the recent appreciation of US Dollars. For the smart investors, many had exited gold upon the anticipation on crude oil movement. Who says timing is not important?




Some analysts even claim that yesterday's rise could potentially spell another major bullish trend for the price of gold. If you believe in this prediction, perhaps it's right time to buy gold again?

How To Invest Like A Shark

For possibly few lucky ones, it might have been a fruitful journey and were early to read the danger signs but for most, it's more likely to be a rocky road with encounters of many land mines! Given the current financial turmoil the world is facing, perhaps it's time to review your own investment or trading strategy.

I recently come across a fine investment book "Invest Like A Shark" written by James Deporre. Deporre was a featured writer for Jim Cramer's TheStreet.com and RealMoney.com since 2001.
In it he makes the case that you can not only beat the markets consistently, but also make money, or at the very least protect your money, even when the market is tanking.

But DePorre says the way to do it is NOT to do what the mutual funds do or what experts tell you to do - sit around waiting for a fundamentally sound stock to go up. Instead, use your advantage as a small investor to get into a stock already on the way up and hop out before it falls-getting in and out like a shark.

DePorre opines that the vast majority of investors have been brainwashed by traditional Wall Street into thinking that it is just plain foolish to approach the market in any manner other than the way a mutual fund or pension plan might. It has worked for them since the inception of the stock market so it should work for you equally well. The truth is that in most cases traditional investment advice doesn't even work that well for the big funds. The vast majority of funds never consistently beat the major indices, but the belief is still widely held that it is best approach for everyone. Unfortunately, the Whales of Wall Street really have no choice but to invest like whales. They are limited stylistically due to their size and the way that Wall Street works. The problem is that they keep trying to justify what they do by telling the rest of us that it is the best and most profitable style of investing. Maybe it is for them but not for the average individual.

DePorre also believes that investing the way many mutual fund investors did certainly is not the best way for the small investor who is investing his own funds.

The best approach according to DePorre for the average investor, who is managing his own money, is to invest like a shark. That means moving quickly, aggressively and running for safety at the first sign of trouble. It means looking at the market in a very different way than the big institutions and traditional brokers, and it means being in control and not being pushed around by powerful forces that the small investor has no control over anyway. Most individual investors have no clue and never will understand how lucrative and safe it is to be a quick, aggressive fast moving shark in an environment that is dominated by huge slow moving whales.
It is worthy to note that DePorre is not particularly interested in a stock's fundamentals or even what a company does; he just looks for the trend. While he does offers some thoughts on averaging in or doing limited stock sells along the way to take profits, this is not a book offering specific techniques. It's goal is to help you develop a mindset, to start thinking about how the market provides plenty of opportunities for big gains, and how the market often clearly signals when it's time to exit.

DePorre's technique is obviously not for everyone, but for those who are open to new ideas and do not have a good "system" yet to follow, this might be worthy to pick up.

You can get more details about his book on http://www.investlikeashark.com

Happy With A Savvy Investment Return!

This year has been a very challenging year in terms of the global investment climate...it has been series of negative events followed by another, don 't you agree? Same old concerns keep popping up, from sub-prime to credit crunch, escalating crude oil prices, inflation, etc! So the key question is how fast and how far the bugs are going to spread? God knows, really!

Some experts say 2009 will be the end of the boom cycle. To me, it appears more like 2008! Light at the end of tunnel? Well, may be traces of light at best but still dim, i should say!

Malaysia of course is no exception, although the country has not been hit so badly by credit crunch. However, the current political uncertainties have indeed thrown a large spanner, where speculations constantly alive that the leading opposition party may overturn the Government within the next few months! It does not help the fact that no opposition party has ever led the country to become the Governor. So i could understand the jitters everywhere, especially from abroad!

Like I always emphasize, it's good to diversify one's investment portfolio, instead of putting all in one basket! For the Warren Buffet fans, of course you would say otherwise?

Real estate property is definitely one of the most defensive and stable asset class of investment. Arguably the best hedge against inflation, and generally stands good against time. Of course there are some exceptions, particularly for places where huge price increase occurs and bubble formed. In the not so distant past, we have witnessed that happened for Hong Kong, followed by recently US residential market and Vietnam! Well, the good thing was at least they had a good run once upon a time!

Recently i manage to dispose off one of my real estate property for a decent 45% gain (gross) within 4 years! Not bad indeed! Not to mention the positive cash flows that I had been earning from rental income for the past 4 years too! My gross rental yield averaged 11% to 13% per annum! I have decided to cash out due to receiving an excellent offer at a time when the economic climate is going through rocky roads. I believe i could certainly keep the spare cash for the next better opportunity out there, especially during times of crisis!

Will KL Real Estate Continues To Flourish?

As always, there are sceptics, and there are optimists. If one were to talk to any of the major real estate developers or property experts about the prospects of properties surrounding KLCC (Kuala Lumpur City Center) where no other than the famous Petronas Twin Towers being the central focal point, they would most likely draw to the same conclusion, that is, KLCC properties will continue to flourish, despite the potential global economic slowdown, US sub-prime crisis and Malaysia's political uncertainties. Some experts admit that there could potentially be a slowdown in KLCC's property market too, but it remains to be one of the most exciting real estate markets globally.

As for the sceptics, here's the matter of fact, prices of KLCC high-end properties have risen by an average of 50% to 100% over the past one to two years! Therefore, it's no longer a question of if but how far can it go!!

Recent property transactions in KL seem to further bolster the excitement ahead. YTL Corporate, a major conglomerate, bought a piece of freehold land valuing at RM2,000 (USD625) per sq feet at Jalan Stonor, near KLCC. Another developer, Sunrise, dubbed the "king" of condominiums due to their strong brand name establised in Mon't Kiara, has today proposed to buy a piece of freehold land fronting KLCC at RM2,588 (USD809) per sq feet! The said land is currently housing the large commercial building Wisma Angkasa Raya. It's also interesting to see that both transactions happened after the March general election!

It is also worthy to mention earlier this year, German-based Union Investment Real Estate AG bought en bloc an uncompleted 41-storey office tower in the city from Bandar Raya Development for slightly more than RM439 million (USD137m). The other noteworthy one was by Kuwait Finance House, one of the most aggressive foreign players in the Kuala Lumpur property market. It bought buy half of the yet to be built 45-storey Menara YNH from YNH Property for RM920 million, setting then a new benchmark of RM1,230 (USD384) per sq feet.

Hot on the heels is the announcement by KL City Hall (DBKL) the approval for upcoming development of more skyscrapers around KLCC comprising office blocks, hotels and serviced apartments over the next few years. Among them is a a skyscraper soaring to about 60 storeys to be built as an extension to the Petronas Twin Towers. It will be located next to the Mandarin Oriental Hotel. Others include a 60 storey building at KL Sentral, 40 storey building at Stadium Merdeka and the 70-storey building next to Twin Towers housing a hotel, service apartment, condominum and retail.

Well, that's great but the question is, is this sustainable or could this be a potential bubble in the making? In my opinion, much depends on how the Malaysian Government, relevant authorities and the property developers market KLCC properties as a global brand. After all, being the "best kept secret" is not going to augur well for anyone. It fair to say that past marketing efforts had been rather futile until 2007. In addition, further liberalisation of investment policies have to be continuously fine tuned in an efficient manner, so that it eases the process of buying properties in the country. The Malaysia My Second Home Campaign has been rather successful but needs further improvement and consistency in implementing policies. Also, the country has to be continuously benchmark against other more developed as well as emerging property markets out there so that Malaysia will remain relevant and continue to gain competitive edge over the others.

If the above can be achieved, I am sure it will be a rewarding journey for those who make the early jump. However, potential can only be fulfilled when concerted efforts are being put in place, which is not this country is reknowned for in terms of past efficiency and effectiveness.

It will be nice to see Malaysian properties competing against the best of the world!

Network Marketing: Is It Your Cup of Tea?

Conceptually, Network Marketing or Multi-level Marketing (MLM) offers a very sound way of making money through LEVERAGING...it is like having a bunch of McDonald's franchisees working for you...absolutely one of the best around! That's why there are so many MLM companies everywhere trying to offer a DREAM to people but unfortunately, it became a broken dream for many...

While MLM does offer great potential (making lots of money), i have to caution you that it's not everyone's cup of tea. Often it involves the bold steps of doing things differently and one must be able to take rejections and failures positively, persevere and never give up! For many, it is easier said than done...many network marketeers cannot last more than 3 to 6 months!

Also, it is important that one needs to be prepared to act as a true leader cum motivator of your team. Your growth is obviously limited if you are merely a follower!

Besides, efficient and quality service provided to your customers is also critical, just like any form of business.

Some of the criteria i would suggest to consider when selecting a good MLM company include:
- Sound and visionary management, who has also demonstrated great support for its people
- Genuine products with excellent quality
- a consistent roadmap to introducing new products (This is because every single product out there will reach maturity one day sooner or later)
- Excellent incentive scheme (but beware, stay away from GET-RICH-QUICK-SCHEME!)
- If one is relative new to the industry, best to join someone (directly or indirectly) or a group who has consistently demonstrated leadership skills cum a strong motivator. Even if one doesn't succeed, there are plenty of learning experience to benefit from!
- Opportunity for market expansion, such as overseas expansion and product diversification.

Does it need to be a proven business? Well, most people think it is wiser to join a new or relatively new start up due to the exponential growth potential. However, it can't be a proven business if it's a new start up for sure. So one takes a greater risk for a potentially bigger rewards. Of course, the reverse holds true too! I guess there is no hard and fast rule...it's all an element of how much risk one is ready to take. Although it may be safer to join a Network Marketing business that is age old and proven, the potential rewards may be lesser depending on the level of market maturity. At the end of the day, i believe there is a market as long as there is an opportunity for market expansion and room for new or supplementary products.

Indeed, one can truly enjoy financial freedom if becomes successful in Network Marketing.

What do you think? Do share with me your views.

How High Can Crude Oil Price Go?

Over the past one year or so, we have seen the price of crude oil shooting off the roof, from a mere $25 to the record high $123 per tonne! Have you ever thought the possibility of crude oil prices to Hit $200? What sort of impact will this have on global inflation? As so many essential items are linked to crude oil, we can imagine the potential crisis that could emerge from this unthinkable event? Too far fetch, you think?

Well, Goldman Sachs, the famous global investment banker, has predicted that the price of crude oil will hit $200 as early as by the end of 2008! Yes, you hear it right, this is the same folks who predicted that the price would hit $100 a year ago!!

Already many countries are experiencing high inflation, and in some countries, food crisis could become a real threat too!

Inflation certainly reduces one's purchasing power with every dollar...so whatever retirement savings you have today most likely will erode further in its value and as such, questions will be asked how long can these money survive? Some research indicates that retirement savings fund tend to vanquish within 3 years after retirement....it is a startling statistic indeed!

What's the solution? Simple, you have to make sure that your funds grow at a rate significantly greater than the inflation rate, so that your real purchasing power will not erode over time. Putting the money in the safest form of cash instruments such as Fixed Deposit simply won't work! In simple terms, one has to learn how to take some calculated risk and invest your money wisely. I really think there is no other way unless you run some form of business that generates tonnes of money every year!

One of the safest asset class for investment is GOLD. Gold prices have in fact risen in tandem with the rise in crude oil, as people generally perceive gold as one of the most defensive form of investment and a safe heaven. Like all investments and commodities, the price of gold is ultimately driven by supply and demand.

Let's look at how well Gold has performed over the past 5 years...


Simply Astonishing!

Looks like I will hold on to my gold investment for some time to come, perhaps with the intention to increase my portfolio too!

If you would like to invest in gold, i recommend you to check this out....
Buy gold online - quickly, safely and at low prices

A Reflection on Tin Commodity: Sunset To Sunshine Industry?

In line with other metal based commodity, tin prices have skyrocketed from a mere USD5k per metric tonne about 15 years ago to more than USD24k this year! That's almost a whopping 400% increase!!

First and foremost some background on tin....this is a metal that bonds readily to iron, and has been used for coating lead or zinc and steel to prevent corrosion. Tin-plated steel containers are widely used for food preservation, and this forms a large part of the market for metallic tin.

In the mid 19th and early 20th century, there has been a huge influx of Chinese immigrants to the then Malaya (Today is known as Malaysia) for the then booming tin mining industry. A number of rich towns (such as Ipoh and Kuala Lumpur) were borned as a result of this booming industry. My dad, also a Chinese immigrant (from the Hakka Province in Kwang Tung), had settled in this piece of foreign land due to the lure of tin mining and potential of riches. From mining to trader of tin, it was my dad's predominant business until the end 80s. Then, tin prices hit rock bottom to the point of many traders or miners were running their businesses at a loss! The consequences were many tin traders were forced to shut down their businesses. The same happened to my dad's business...

I remember vividly that my dad used to tell me that tin trading was a sunset industry. So he never believed in imparting any knowledge to me about the trade!

How times have changed!

New Demand in 90s
The shift in environmental legislation regarding the banning of lead in solder has come to the rescue of the tin market as tin had had a torrid time since the mid-1980's when prices rose to levels that caused manufacturers to switch to other raw materials. However, with a consumer economy emerging in China and gathering pace in other parts of Asia, demand for electronics and hence solder lead to strong tin demand. In addition as China's rural population moves into the cities, more food will need to be packaged and this benefits tin demand.

Ironically China is now one of the major tin producing country in the world!

Today some of my distant family members are still running the trade, albeit at a smaller scale, as Malaysia's production is smallish compared to the rest of the world. However, as prices are so good, the profit margins are exorbitant!

How I wish I could be the one inherited the knowhow and business from my dad and continued with the legacy!

Today tin is commonly traded in many countries, including Malaysia, of course.

Malaysia Real Estate Take Five...

Below is some of the latest statistics compiled by Kuwait Finance House Research. For those who wish to invest in Malaysia's real estate properties but taken aback by the recent political uncertainties, this information could possibly help.

Malaysia’s population is expected to increase from 27.17 million in 2007 to 28.96 million in 2010. The median age of Malaysians is 27.4 years. In 2007, a total of 63.4% of the total population consist of those in the working age group of between 15 and 64. The Government expects that 63.8% of the population would be living in urban areas, resulting in a higher demand for more houses, schools and employment.

In recent years, the proportion of total potential buyers grew from 36.9% in 2002 to 39.1% in 2007, underpinned by an increase in the age groups of between 40-49 and 50-59 at a 5-year CAGR (Compound Annual Growth Rate) of 2.7% and 5.4%, respectively, in 2007. The 40-59 age group is likely to be more affluent than the younger age groups and also more likely to buy higher-end property and own more than one property for investment purpose or for their children.

The average lending rates continue to fall to as low as 6.27% in January 2008 as compared to 6.57% in January 2007, suggesting that banks are still competing for quality mortgage home loans. However, if the impact of the world economy worsens, the non-performing loans (NPL) for residential property may edge upwards, in particular for properties held for investments. purposes.

According to the research, real estate property prices are expected to widen between mass market and high-end residences given the spillover effects of petrodollar inflows on property demand in Malaysia as prices are relatively cheap compared to regional properties.

However, given the physical supply coming onstream in 2008 and 2009, the growth in rentals and capital value is expected to ease by the end of 2008.

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.

Is It Time To Buy Into Battered Vietnam Stocks?

For many, Vietnam has long been touted as the next China in the making... With a USD$70 billion economy, 85 million diligent working-class population and 8.5% GDP growth, it's not unrealistic to make such predictions. Many foreign companies have flocked into Vietnam, setting up mainly low-cost manufacturing plants and ventured into the property market to serve the supposedly "hungry" market. However, being a relative new emerging market, risks are abundance. Nevertheless, it is difficult to ignore Vietnam as it has all the potential to be the next major source of growth, after China and India.

So, today, i would like to take this opportunity to share with you an article on Vietnam from an investment perspective.

Today Vietnam has an inflation problem, but it’s a great market to pick up value, says a chief investment officer, adding that price/earnings ratios for many firms have fallen to below 10 times — cheaper than the Thai and Philippines markets.

The hype about Vietnam’s WTO entry and its “mini-China” potential has been washed away by double-digit inflation but, ironically, now could be the time for funds to pour money into the country’s ravaged stock market.

Investment managers who talked up Vietnam in the past two years say that amid the slump in shares, bargains are emerging in the US$70 billion economy, which is still expected to grow as much as 7.5 per cent this year despite a global slowdown.

Government estimates show foreign direct investment disbursements would jump 25 per cent to US$10 billion in 2008 from last year, when it joined the World Trade Organisation.

After two years of what some have described as gambling in the fledgling stock markets of the Communist Party-run Southeast Asian country, investors are urged to take a long-term view.

“I used to joke that Vietnam didn’t need a casino because it’s got two: the Hanoi and Ho Chi Minh City stock exchanges,” said Bradley Lalonde, chief investment officer at BIDV-Vietnam Partners Investment Management. “In a way, it became that.”

However, Lalonde said companies had not borrowed heavily and still needed capital to take advantage of an emerging middle class and a fast growing economy that has drawn manufacturers such as Samsung Electronics Co Ltd, Intel Corp, Compal and Foxconn.

Some companies, including listing candidates who have already had initial public offerings pushed back, would look to foreign investors to raise equity through private placements.

“Yes, they’ve got an inflation problem, but it’s a great market to pick up value,” said Lalonde.

Investment strategist Spencer White, who helped stoke Vietnam fever in 2006 with a report calling it a “10-year buy" while he was at Merrill Lynch, said market bubbles were popping.

“One bubble has burst — equities. The other bubble currently bursting is the property market,” said White, who is an adviser to Thien Viet Securities in Ho Chi Minh City.

Property prices have fallen about 10-15 per cent this year, after quadrupling in cities last year.

“That means opportunity,” White said at a sparsely attended Hong Kong conference session on Vietnam. “I’ve seen more private equity teams in the last six weeks than in the previous six months.”

While the global credit crunch has done little to encourage investment in risky emerging markets, Vietnam’s headaches are rooted in soaring food, fuel and house prices, reflected in a 19.4 per cent jump in the consumer price index in March.

To battle inflation, authorities have sought to restrict bank lending, which grew 50 per cent last year. The government also has raised bank reserve requirements and interest rates, and imposed stricter rules on lending.

The Ho Chi Minh Stock Exchange is the worst performer in Asia this year, losing 43 per cent, after being one of the top performers a year ago. The share slump prompted government intervention in March to buy back shares and restrict the intra-day trading band to 1 per cent.

The market rose sharply on Monday after regulators doubled the intra-day share trading band to 2 per cent to increase liquidity.

“The panic that was around suggested that the Vietnam story was over, but that’s clearly not the case,” said Kevin Snowball of PXP Asset Management in Ho Chi Minh City. “The government intervention achieved its aim to slow down the fall and the panic and now people can stop and think long term.”

Sacombank Securities, whose research tries to educate with a “word of the day” explaining terms such as net asset value, says catfish exporter Navico is trading at 8.8 times earnings, while Petrovietnam Fertilizer and Chemicals Co, information technology firm FPT and Industrial group Hoa Phat are at around 13 times.

Still, Vietnam remains an opaque market, lacking research to aid investors. The stock market is still illiquid and the government interventions have highlighted the risk that new rules can be sprung on investors.

“It’s possible to make a quick killing but you could be the one to get killed!” investment manager Lalonde said.

For the complete article, please visit Reuters.

In Malaysia, one can invest in Vietnam via the Vietnam Unit Trust fund offered by Hong Leong Bank. However, as this is a wholesale fund, only high net worth individuals (those with net worth more than RM3 million or roughly USD$960k) are eligible!

Market timing – fool’s gold?

THERE are those who believe you cannot possibly time the market in terms of entry and exit. Fair enough.

The random walk theory lies in the fact that you cannot beat the market over the long term. But we also have the proliferation of hedge funds where managers get a lucrative 20% of profits kicker annually on gains. If the random walk theory is correct, then the “hedgies” would be a terrible business to be in.

The out performance relative to the benchmark is called the alpha. Hence the name of the popular website Seeking Alpha.

Out performance can be gained via market timing strategy and/or superior stock selection strategy, to simplify matters.

For this article, I am only looking at market timing.

If we could really predict the market's moves, market timing would be great.

The problem is that there is evidence to show that market timers do not do well.

An annual study by DALBAR, a research firm, showed that the average investor in equity funds has averaged only 4.3% per year in returns over the most recent 20-year period in which the S&P500 averaged 11.8% per year – and DALBAR finds that most of this under-performance of the basic market index is due to attempts to time the market.

There are a host of other studies that show that market timing leads to returns that substantially lag the market.

Even if there were a few funds out of the thousands that have proven to market time successfully and outperform consistently over a 5 or ten-year period, would it be smart to give them your money?

Essentially, you have to bet on these funds' ability to maintain their track record or on the long-term evidence pointing to the low success rate of market timing.

There is a large body of research, which concludes that actively-managed funds that beat the market in some period are not likely to continue to out-perform over any extended period.

In 1975, William Sharpe published a seminal article on this topic: “Likely Gains from Market Timing”.

In this article Sharpe demonstrated statistically that in order to benefit from a market timing strategy you had to guess right 74% of the time. Hence it is possible, but very arduous indeed.

Alpha is a definition only; it may or may not exist. For people to get alpha, they need to be better at market timing and price timing.

Warren Buffett obviously does not believe in market timing or price timing. He sees them as businesses, and for the right price he will buy the business regardless of sentiment.

He may even suffer short-term weakness or short-term losses holding these businesses, but he does not market time or price time his purchases. To him, if the price is cheap relative to future value, then it's good enough.

If market timing and price timing works for only 5% (1 person in 20 is about right) of participants (or even just 1%), all studies would reveal that market timing and price timing does not work as the results are not substantiated – hence the random walk theory.

Suffice to say that even if the 5% or 1% do make it work (which is what I strongly believe), it's just that much harder.

When things are that much harder, many will opt for easier routes such as buy at good price and hold, or buy the business and forget the volatility.

I am not saying I can do this well. I am not saying anyone can do this well. I am suggesting that one can do market timing and price timing well provided they get two things right – the big picture and the catalysts.

People like Buffett and Lynch are big picture guys, but you still need to get the catalysts right for market timing to work properly.

For example, Buffett has been short on USD since 2000 but he only made money over the last two years and lost some in the first 3 years. As for Soros, he is trying to be both. When he shorted the British pound and made billions, he got both right.

But even Soros cannot get both right all the time.

Getting the big picture right is the easy part. Determining the catalyst(s) for a dramatic change or trend swing is a lot harder.

Truth is, there is no known classes on catalysts like what is significant, what is not, the cumulative effect of several catalysts, catalysts for differing economic environment, how sentiment relates to catalysts and so forth.

If you see a bubble forming in an asset, say property, you can fairly judge the probable steps ahead for the market in coming to terms with the bubble: you project that prices will rise, there will be over-exuberance, followed by resistance to bearish calls, rising rates to counter inflation, prices stubbornly refusing to come down, start of some foreclosures, some concerns among banks, some leveraged property companies failing, rising foreclosures, a crisis being discussed by the media, and so on...

These are the natural chain of events, which make up catalysts in bringing to fruition changes to trends.

I do think that if someone learns to follow cycles and chain of events closely, they will be able to better time the market.

Someone who calls the Shanghai index overvalued at 4,500 on the way up would be a good read but a poor strategist. The index hit 6,500 before moving down to 4,000 six months later.

The pro is correct but if he made any money, he probably lost on the upside and if he kept short all the way from 4,500, he would have lost even more on a net basis.

One should have stayed invested as bull runs tend to overshoot, but stay alert to trade out on warning signs.

The listing of Petrochina on Shanghai was a “high” – how to recognise that as a critical catalyst? Experience, predicting capital flows and most importantly, predicting or anticipating the behaviour of investors.

Here are some recent examples:

·Subprime mess – Big picture calls were loud by mid-2007 but markets were still resilient. There were plenty of catalysts, but deciphering which one will break the camel's back is the hard part.

Sometimes, few cumulative catalysts are needed before the water overflows. I regard the second plunge of Countrywide to be a major catalyst, which prompted Bank of America to average down dramatically.

The other major catalyst was the Citigroup's write down, not of the CDOs holdings but because of the significant provisions made for future “problems with consumer debt”.

Thanks to CNBC and Bloomberg news, there is an overload of information. To be able to stand back and pick the real catalysts is nirvana, for want of a better word.

The key is getting the big picture right first. Then assess the catalysts accurately, but it can be an arduous task. If we still cannot market time or price time, then at least we know why we are not good at it.

To do well in market timing is like climbing the Everest. There are those who will make it to the top (very few, that is). Most will die trying halfway. Some will give up after a few inclines. Others will opt for hills instead.

(The above article is written by S. Dali, an ex-analyst/fund manager and active blogger on Malaysia finance matters.)

Are you a believer in timing the market? Do give me your views.