Monday, November 10, 2014

4 Lessons for Share Investor

Let me tell you that the purpose of this article is to warn investors about the perils of investing in the stock market. I wanted to share this article with you, in an effort to gain insight into some of my decision making process that went horribly wrong!
I bought these stocks despite Mr Market warning me by providing Red Flags all over the place that I should proceed with caution or at best, these stocks should be avoided at all costs!
But nevertheless I bought into them … I guess I was a sucker ..

1) PN17 stocks

PN17 stocks are companies in financial distress in Malaysia. They are usually very near to closing shop. When the stock exchange categorize a stock as PN17, that action by itself should be a Big Red Flag to current and potential investors. Hello, are you listening?
Well No, I shut my ears to all these “noise” because I thought the turnaround story on this Pn17 stock were genuine. Boy, was I wrong!
Later my own analysis told me that 80% of all PN17 stocks went bust, got delisted and never came back into the stock exchange.

2) Long Term Loss Making Stocks

These are another category of stocks I love to buy early on in my investing life. They are loss making companies which were raking losses for many years – the main attraction of these stocks are they were cheap, speculative and usually have juicy turnaround stories which I bought into. Bad move!
I thought these were good signs of a stock, but in reality, they were Red Flags all over the place which Mr Market put up to inform investors to “Please stay away at all costs “.

3) Buying Overvalued Stocks

Buying stocks which were overvalued were not as bad as the two reasons I’ve listed above, but it was still a big mistake. Have you heard those veteran investors saying to “Buy low sell high” ? They are right.
I bought a lot of overvalued stocks and this is one of the main reasons I did not have much success to show during the early years of investing. 

4) Buying Cyclical Stocks (At The Top Of The Cycle)

I bought cyclical stocks at the top of their cycle. They are stocks that are sensitive to the state of the economy – when the economy is booming these stocks will be priced at the top but when the economy shrinks they tend to drop very quickly. 
The trick to catch these stocks is to buy when the economy is bad and sell them when the economy is booming. Unfortunately for me, I did the exact opposite. Lesson learned, oops ..


These 4 investing mistakes lead me to large losses during the early years of my investing life. Hopeful with this insight, new investors will not make this type of investing blunders over and over again. Lesson learned : I was a sucker. 


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