10 Common Stockmarket Myths To Avoid

1. Stock market is a form of gambling. Someone must lose in order for someone to gain - As a matter of fact, it is possible that everyone gains without the need for someone to lose (in real terms). How is that possible? In a bull market, it is possible that different investors buying into a common share at a different time make money. It is only the "economic" (not real doll loss) loss that an investor suffers as a result of selling the stock early.

2. Buy a stock when there is large buying volume sitting in the order transaction queue, as if there were many buyers waiting to buy the particular stock. - Very often this could well be the play of syndicates, to entice investors to buy the stocks when in fact they were looking to sell! For all you know, the buyer order could well evaporate all of a sudden! Sometimes, it could also well be an act of institution investor to provide support to the share price.

3. Buy when the share price has achieved higher highs on multiple consecutive days -
Quite often the particular stock with such pattern of trade may well be a sign of overbought position. A correction could be on its way!

4. Buy on news. - Very often investors already started accumulating the stock upon anticipation of a major event that will significantly enhance earnings of a company ahead of time. So instead, a better approach would be buy on "rumours", sell on "news or fact"! However, there are exceptions to this rule, such as if the market has not anticipated such event from happening.

5. Buy the Top 10 or 20 most active stocks, that is, follow the herd's mentality and buy when the particular stock is hotly traded. More often than not, you could well be buying a stock at a high price when the other wise investors were selling. Buying at a high price merely put yourself in a high risk position for potentially a smaller gain!

6. buy or sell with a view of short-term gain. Most people like making QUICK money, so that one does not "tie down" his or her funds. - I know the day traders and technical chartist will disagree with this. The fact of the matter is that unless you are a full-time trader, it will be difficult to monitor your stocks on an active manner. Moreover, doing short-term trading merely increases your cost of transactions over time!

7. Buy a stock when a key businessman or politician is buying the stock, as there must be some positive development going on. - This is pure speculation. Prices could well go the opposite way if the speculated event does not materialize. Moreover, a significant event may take a long time to materialize.

8. Holding on to stocks with the false believes that stock prices will ultimately revert to where they were once upon a time. - Never be afraid to cut losses as you could reinvest the money elsewhere with better returns. Be bold to admit your mistakes (After all, everyone does make mistakes). Holding on to stocks with poor fundamentals may well cause you to suffer significant losses! It is utmost important to understand a company's fundamentals before investing. Merely guided by rumours or tips is a risky business!

9. Only insiders can make money in stock market. - Fact of the matter is, you do not need to be an insider to make money. In fact, insider trading is illegal in most markets. You can make money by investing in fundamentally sound stocks. Value the business of a stock in the form of potential growth and management capability.

10. Stock market prediction is the key to successful investing. - Fact of the matter is, no one can accurately predict the movement of a stock, not even the most experience technical chartist! Technical analysis merely serve as a guidance, based on sophisticated software that can churn out predictions based on historical data and complex algorithms that no lay man can understand. Fact is, software is a program written by humans to best reflect patterns but never human behaviour which can be unpredicted, due to various circumstances such as fears due to uncertainty.

Saving Private Equity

The recent US Federal Reserve's decision to lower interest rates by 50bp have indeed given a huge interim lifeline to the global financial sector to continue extending credit to credit-worthy borrowers and encouraging Merger and Acquisition (M&A) activities. Unlike the market crash in August where many investors were found catching a falling knife, most markets have since recovered. In fact, some stock markets such as Wall Street and Hong Kong Hang Seng have either reached or surpassed the all-time high. Some attributed the bullish sentiment to global funds' window dressing activities, which coincided with third quarter closing, whilst some relate the reason being recovery of confidence due to lesser probability of credit crunch. However, in my personal view, the real impact will only be testified in the coming months or quarter, where corporate earnings are due to release. Certainly i do not think we are totally out of the woods yet. Whatever it is, it is certainly positive for all, including private equity, whom has been recently heavily hit by the US subprime woes as a result of the meltdown in residential real estate property prices. Many of the private equity had indeed either suffered major losses or facing the crude reality of closure. Indeed, this is a good lesson for all that for those who are fond of "HIGH RISK, HIGH RETURN", the reverse (HIGH RISK, HIGH LOSSES) holds true too!

Nevertheless, private equity is definitely here to stay as companies, institutions and high net worth individuals continue to pursue opportunities for greater returns at "whatever" cost. This is the risk that investors should bear in mind and ready to accept the "fate" if the worse should happen. However, let's not rule the whole forest as bad as there are a number of "genuine" private equity funds that are continuing to do very well.

When To Rent Or Sell A Property?

Other than the one you are currently occupying, are you currently owning any real estate properties but do not know what to do with it? Let us explore...You basically have three options, that is, rent, sell or hold. If you decide to rent it out, i congratulate you because you now have a passive income generating asset that gives you residual income until your lease expires. However, you need to take into consideration other operating expenses such as maintenance, service charges, loan installment (if any), assessment, real estate broker fees, taxes and other general upkeep expenses. After deducting all these expenses, your net income should determine whether your rental is in a positive or negative category, normally termed as positive or negative cash flow. Ideally, you should rent out the property which gives you positive cash flow. (On the flip side of the coin, you probably should not purchase a property that does not give you positive cash flow in rental yield, unless you are confident that the piece of property has good potential to generate an attractive capital return!) In addition, you should also watch out for the rental yield, versus the average return if you were to park the money in a low risk fixed income money instrument such as fixed deposits in a bank. For example, if interest rates with your fixed deposit is 3%, then you should look for net rental yield that more or less double that!

In the case the property could only generate negative cash flows and/or unattractive rental yield, it is probably better to dispose it off in the market since you could use the money to later purchase a piece of property that generates better cash flow or return.

What if you feel confident that this piece of property will generate good capital returns if you hold on to it? Well, you could always do so as long as you assess the probability of this to happen, taking into account the burden of holding cost. The worst to happen is if you get it all wrong and you end up holding on to a piece of property that does not generate any returns!

Fed The Saviour of the Day?

What a day, global markets came alive after US Federal Reserve decided to cut interest rates by 50 basis point (or half a percentage). This is an unexpected positive news from the Fed, given that the general consensus appeared to be a maximum rate cut of 25 basis point or stayed unchanged. To top up the icing on the cake, Fed also cut bank loan discount rates by another half a percentage! The Fed's decision, aimed at shielding the economy from a credit crunch as well as a slump in the housing sector, came about a month after it cut its discount rate in an emergency move to encourage banks to borrow directly from the central bank. US and global markets indeed reacted positively, with Dow rose 2.5%, Asia stockmarkets also rose between 1 - 4% with India Stock Exchange being the best performer with a 4.17% increase! (Interesting to note that China's Shanghai Index had not reacted positively to the news and had in fact fallen by half a percentage point. Perhaps a strong signal that China stocks are losing its steam after such a fanatic run).

As global investors welcome the latest development, there were mixed reactions from researchers to analysts. Some augur the move as a good one, while others felt that US Federal Reserve had overreacted. Perhaps the US Central Bank finally reckons that the housing subprime woes and credit crunch are causing a bigger damage to the overall economy, leading to a worse than expected job data, thus such drastic measures has to be taken. However, there is still a genuine threat on inflation, given the fact that crude oil price has again hit record level and is still threatening to rise further. Perhaps, it could also be a case of politics versus pragmatism....Nevertheless, the measure is indeed a strong dose of confidence across the business and investment community. However, it does not mean that we are now out of the woods (of the subprime and credit crunch). A lot will depend on how companies and financial institutions perform over the next few months.

Penang the Next Global Mega City?

Penang is a popular island state situated at the northern part of Malaysia. Commonly known as the Pearl of the Orient, Penang is vastly popular for its food (eg., Prawn mee, Assam Laksa, Lo Bak, etc) and a popular tourist destination offering nice beaches and holiday resorts. Penang is also home to many high tech multinational and local manufacturing companies. Its property prices is also one of the most expensive in the country due to scarcity of land. For many years, Penang development has been rather stuck in a stagnant image, due to some major relocation of high tech manufacturers from here to other lower cost destination partcularly China, and the perception that Kuala Lumpur is the better place to job opportunity and making money.

For the next foreseeable years ahead, I believe Penang's image is set to change dramatically given that there is now increasing influx of foreigners into Penang (it's nice to live, good infrastructure, friendly people, etc) and the real estate properties in the state are also increasingly gaining popularity and attractions from property developers and foreign investors. The major area fronting Gurney Drive ( a popular sea-side tourist spot) is also bursting with new commercial activities with the upcoming launching of up-market shopping mall, Gurney Paragon. Its neighbour, Gurney Plaza, was just acquired by Capitaland of Singapore a couple of months ago at around RM1,000 psf!

The latest unveiled is the launch of Penang Global City Center (PGCC), reminiscent of Kuala Lumpur City Center (KLCC) where the twin Petronas Tower is located. This is indeed the latest mega property project unveiled in Penang by the Prime Minister of Malaysia himself. The project spans over 257 acres of land located at the old Penang Turf Club. Ring any bell? For those who are familiar with the present KLCC site, it was also formerly the KL Turf Club! The project entails top-class hotel, retail, residential, international school, arts, medical tourism and exhibition centers, connecting with monorail service and designed by French and New York architects! Moreover, the zone will also be classified Multimedia Super Corridor which carries the MSC status, a benefit comes with tax and business incentives specially dedicated to ICT companies.

Judging by the great success and world class recognition enjoyed by KLCC and the positive spillover to the surrounding real estate property valuations where prices have skyrocketed, it is worthy to take note of this latest special property development. If all goes according to plan, i have no doubt that property and land prices surrounding PGCC will also escalate over the years ahead! This is also indeed a great opportunity to position Penang as the next potential global mega city of the world!