80% of the average people losing money from stock market, share market again is the avenue for people come with prepare, equipped with knowledge and experiences to earn money.
If you want to be 20% of this group of people, there is no shortcut but to gain your knowledge by learning, reading related share investment book, reading financial magazine, keep abreast with economy development, government policy and last but not least understand the financial statement, financial term and cash flow statement.
If you do not have patience and time to equip yourself with above knowledge, perhaps invest in mutual fund would be a better choice.
I classify share investment strategy into 2 major types, value investment and technical investment.
Value investment- one of the most prominent success story of this type of investment strategy is Warren Buffett. He emphasizes on strong foundation, less sophisticated industry, constant cash generating and less competition company. There are not difficult to find this type of counter in the market, for example, Public bank, DBS bank, UOB, Hong Kong and Shanghai Bank, Constellation Energy Group, Disney Co WALT and Coca Cola Co, however, you need to know when is the entry point for these stock and be prepare to hold for long term. (note: you should be at the stage 4 of life financial cycle to be suitable for this strategy). You can own all of these counters but if entry point were at their peak, you may not necessary earning profit and may be making huge losses. Thus, to know when the correct entry point is required you to have the knowledge of economy environment, financial statement and PE ratio.
Value investment is an investment paradigm that derives from the ideas on investment that Ben Graham began teaching at Columbia Business School in 1928 and subsequently developed in their 1934 text Security Analysis. Although value investing has taken many forms since its inception, it generally involves buying equity share whose market price appear underpriced by some form(s) of fundamental analysis As examples, such securities may be stock in public companies that trade at discounts to book value, have high dividend yields, low PE ratio.
Warren Buffett, have argued that the essence of value investing is buying stocks at less than their intrinsic value. The discount of the market price to the intrinsic value is what Benjamin Graham called the "margin of safety". The intrinsic value is the discounted value of all future distributions.
However, the future distributions and the appropriate discount rate can only be assumptions. Warren Buffett has taken the value investing concept even further as his thinking has evolved to where for the last 25 years or so his focus has been on "finding an outstanding company at a sensible price" rather than generic companies at a bargain price. I created one Excel spreadsheet to factor in key elements of value investment to provide guideline for myself to decide on point of entry. It is free for download, thus use it for analysis purpose only and at your own risk.
Technical investment. - A method of evaluating share equity by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use tools and charts to identify patterns that can suggest future activity. I allocate my share investment portfolio by 80% based on value investment method and 20% based on technical investment analysis method, for technical investment analysis, I use the T3B method.
My philosophy of this combination is, while I sit on the long term investment strategy to build my wealth and I still keep abreast with market development via technical analysis and earn short term profit to surprise my loves one with unplanned vacation, surprise gift or bring family for luxury restaurant. Some times, ocassion surprise will bring more joy to your family and love one.
Technical analysts believe that the historical performance of stocks and markets are indications of future performance.
In a shopping mall, a fundamental analyst would go to each store, study the product that was being sold, and then decide whether to buy it or not. By contrast, a technical analyst would sit on a bench in the mall and watch people go into the stores. Disregarding the intrinsic value of the products in the store, the technical analyst's decision would be based on the patterns or activity of people going into each store.
