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Biggest Investing Myths

A lot of investing shows, books and blogs have come up with different kind of investing strategies which if followed by an individual can lead to some serious pitfalls. Mentioned below are all my own personal opinions

1. Double Down:  Let’s say an investor buys an investment hoping he’s going to make some quick gains just like how his friend told him or  someone on CNBC or BNN said so, the next couple of days the investment value goes down in value, guess what he buys more, and it goes even lower and he buys more. Therefore, instead of a quick gain, the investor is made to look like a bag holder and only hopes that the particular investment is going to increase in value EVENTUALLY. The following UNG : United Natural Gas chart is the perfect example of not to buy 52 week lows, cause guess what it hit 52 week lows again and again and again.

2. Don’t be a hero: Most investors have that rush of blood of trying to be hero and go about telling everyone, how they nailed the top and bottom of a particular investment. As an investor, you should rather be looking at trying to find the trend and ride it till it reverses. Most top or bottom pickers don’t survive long,  google it and you would know yourself.  All the top pickers have never rode the whole trend up or down, instead have closed out their positions with very little gains, however, the amount of risk which most of them have taken are undefined as you never know how high an investment can go or how low an investment can go.

3. My Financial Advisor or Fund Manager is going to handle my finance: Time and again, I have gone around beating my chest, mentioning not to rely on what someone tells you to invest but instead try to learn about investing at your own pace and make your own mistakes. It’s easy to blame someone when your investments have gone wrong rather than to take the blame of your own wrong decision. (if your looking for good Fund Managers look for managers who have most of their own personal investment in that fund and so that they are not managing the fund just for the sake of managing the fund and making management fees but instead are looking to make some gains for themselves and for the investors).

4.  Investing is a get Rich quick strategy: Everyone wants to buy that one stock which is going to go all the way up and never come down and want to get rich off the ONE investment. Let me be realistic, odds of an investor picking that particular investment is as high as you winning a lottery and even if you pick that stock you would be cashing it in too soon. Therefore, invest based on a good risk-reward strategy, apply it again and again.  Investing is a marathon not a 100m dash.

dchsn6

Psychological Aspect of Investing/Trading

‘Learn to be comfortable being uncomfortable’

Trading/Investing is just like another game to me, where you require not only good skills but also good mental preparation.

Successful people who are successful in their field are usually not born with it, but rather it’s the time and effort which they have put in which makes the things which they do look so simple to everyone else whereas to them it’s just another day. For more on this I highly recommend Outliers: The story of Success by Malcolm Cladwell. Similarly, trading or investing, if you put in enough time and effort to understand the process and build your own investing/ trading system, it’s the constant process of building a plan of action, executing it, reviewing the result, with the help of review improving your plan and doing it again and again till you get the ‘Aha’ moment where everything falls into place. For some it might take 100 hours, 1000 hrs or even more than 10,000 hours.

Building a trading or investing plan is 10% of the game, 90% is mental preparation. The reason being you can develop a plan, however, if mentally your not prepared to accept failure and try to grow, you won’t be able to improve neither as an individual nor as a successful trader. Remember, failure is part and parcel of life, you learn the most from failure, the reason being you got hurt and bled and you don’t want it to happen again. In trading terms, having a loss in one of your investment or trade will make you go back and reevaluate everything from scratch as to why it happened, never let a loss demoralise you which will only happen when you are willing to accept the fact that you were wrong and are willing to close out your losing position. The success is a sweetener to your good preparation and execution.

One of the best videos about mental preparation that I have come across is about Evan Longoria

http://vimeo.com/6153913

2012: Top Down Sector Analysis Part 2

This is a continuation from my previous post http://ibankcoin.com/dchsn6/2012/01/02/2012-top-down-sector-analysis-part-1/

4. SPDR Consumer Discretionary (NYSE: XLY)

This is sector has held up really well even after the volatile 2011. $35 region has been a nice support as long the prices are above $35.

I like Mcdonald’s (NYSE: MCD), however not at these prices. If you are trying to have NYSE: MCD in your portfolio look for dips in the market for buying opportunities as a long term hold. A slight pullback to $90-$95 region would give the best risk-reward play.

5. SPDR Consumer Staples (NYSE: XLP)

As long it hold $29 region, I would be a dip buyer in this name.

I didn’t like any of the chart setups in this sector. Maybe in a few weeks time, some of them might setup.

6. SPDR Energy (NYSE: XLE)

I need to see how it behaves in the $82 region.

I like Elpaso Corporation (NYSE: EP) as long as it holds over $22

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2012: Top Down Sector Analysis Part 1

Happy New Year to you all. I decided to do a quick top-down analysis on individual sectors and some of the names which I like. This is by no means  a recommendation to go long or short.

1. SPDR Financial (NYSE: XLF):

Below is the monthly chart of the S&P 500 Financial Sector. As it can be seen, there is heavy resistance at 17.50 region dating back to July 2008, when the mortgage crisis started. It’s gonna be a long hard grind for the financial sector to come to the 17.50 region. Fundamentally, with tighter and tighter regulations

across the board, profits of the financial companies would get affected by it. In terms of growth, I don’t see a lot of potential.

All the big names in the financial sector on the longer timeframes still look  to be in the consolidation phase. I personally don’t like any of the big names in this sector.

2. SPDR Utilities (NYSE: XLU)

This sector which is one of the good names to be in during recession is moving up in an upward channel.

I like  Southern Company (NYSE: SO) in this sector.

3. SPDR Technology (NYSE: XLK)

This sector has to see some improvement, if the markets are to be bullish. Currently, it’s also in a sideways consolidation phase

I would like this to break 29 region to take us in the bullish pahse in the market.

I like Google (NASD: GOOG), Visa (NYSE: V)

I will doing another post for the rest of the sectors in my next post.

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Investing: Back to Basics

Investing in the markets is both fruitful and yet exhausting and frustrating at times. In 2011, S&P 500 closed unchanged, after all that happened in 2011 where most of the investors have loads of losses in their accounts, they would be surprised to know that the markets in general didn't really go anywhere and remain unchanged. I wanted to share a few of thoughts about investing.

1. Risk what you are willing to loose. If you have any sort of fixed payments that you need to do in life, please and please pay them off first before you risk anything in the market. Market is always going to be there.

2. I love this quote 'Markets can remain irrational longer than you can remain solvent' by John Keynes. In layman  terms, it simply means no matter what you think about a particular investment both on the upside or downside, the markets can go against you till your account goes into deep red and you get frustrated and take your loss, before your conviction is actually right.

3. Invest but always know what your risk is. Always know how much your willing to risk per investment and how much do you want to get out of it. Never invest based on hope. Always invest based on facts.

4. If you are wrong, accept that your wrong and move on to the next investment. Never let ego or overconfidence on an investment come in your way. It's better to get out and take a small loss, rather than hoping for things to work itself out.

5. If the investment you bought is not going your way. A simple reason is that you bought it at way too high prices or made a wrong investment in the first place.

6. Never ever buy any investment based on what somebody else told you is a good buy or a good sell. Always do your own research. Own your decisions, blaming is too easy.

7. If you invest based on fundamentals, then you better know what the business your investing is all about and what is reported on the financial statements. If your into technicals , you better know what levels or patterns your looking for.

8. Cash is also a position. Many people would disagree with me that however, only those who got hammered in 2011 would agree with me now. Sometimes, it's just better to stay out and wait for the right opportunity.

9. Always remember even though on the longer horizon, markets do move up, however, only 5% of the people succeed in investing.

Wish you all a HAPPY NEW YEAR and hope 2012 as I say it is gonna be a 'MONEY YEAR'

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BUY:RIMM

RIMM (Research in Motion Ltd.) reported it’s earning last week on Thursday December 15, 2011  and as I mentioned in one of my previous posts cheap can become cheaper. I am sure with most of my viewers who saw the  TITLE ‘BUY:RIMM’ they would be licking their lips and waiting for the markets to open on Monday and buy a lot more of RIMM shares cause  it’s trading at stupid cheap valuations or if they already hold it , they would want to buy more and average down.

I am sorry to disappoint you guys, in my opinion, RIMM at these prices is in my

‘GARBAGE’  stocks list or should i say ‘ DO NOT TOUCH’ list. Let me break it down for you.

Fundamentals:

1. Product Delays: RIMM over the past few years has suffered most in terms of product delays than any other tech name out there, and surprise surprise, they have announced that their new set of blackberry phones will not hit the market until late 2012 as compared to early 2012 as per their previous announcements.

2. Market Share: In US , RIMM in the smartphone business had a market share of 9% in third quarter of 2011 , down from 24% in 2010.

3. Net Income: $265 million in in Q3 2011 as compared to $911 in Q3 2010.

4. Tehnical Issues: RIMM which is proud of its BBM service, had an outage for almost 2 days.  A lot of users who were debating about whether to switch to Android or iphones couldn’t have found a better reason to switch.

Techinals:

I have attached a daily and a weekly chart, show it to any 2 year old and ask them what do you see in these two charts, a simple answer would be ‘it’s going down’. 52 week low every week tells me something that nobody wants to buy it and sellers are looking at every opportunity they can find to sell it at every up move they see in RIMM.

CONCLUSION:

I am not recommending to short RIMM or buy RIMM. As an investor, I would recommend that there are a lot of other good names out there with good growth stories and future growth outlook that you can be in, rather than buying a stock which you might be stuck in.  Hence, it’s in my ‘GARBAGE’ list stocks for now, cause I don’t see a good risk-reward ratio.

dchsn6

Disclaimer: I have no affiliation to RIMM (Research in Motion Ltd.) and I do not recommend it as a buy, hold or sell. I would recommend the viewers to please contact your Financial or Investment Advisor before making any trading decisions. This post is only for my own personal use and stocks analysis.