29 July 2014

Treat Shares Investment as Long Term Investment - July 2014

I have seen many people become millionaires just because they are holding their business long enough or holding their property investment long enough. But I seldom get to know millionaires who can be like Warren Buffet just to hold the shareholdings for long enough. Why is that so? 

There are too many speculators in the market that creating the volatility of the stock market movement. Just too many traders believe that by trade in  and out and it could be faster achieving the financial freedom compared to just buy and hold for long term. 

To be honest, it is quite a boring job if just looking for the annual reports and financial news on daily basis without making any investment decisions. And there are just too many people giving up this boring job and just hope some one to give them tips to buy a counter. They will treat stock investing as jackpot, as they simply buy or sell based on other people recommendation without any further thought. This is somehow not a good thing. Just imagine, if you are doing a business or investing in real estates that require you to have a huge capital outflow in the first place, would you just throw the money into it without any consideration? 

For real estate asset class, it is quite a norm if people keep it for rental income purpose instead of trading purpose. As long as they have the steady cash flow, they would not check on the market transaction price on daily basis. But you will look like a stupid idiot if you just buy and hold the shares and collecting dividend while waiting for the share price to appreciate in long run. I believe this is something related to psychology. You will be easily influenced by the share price movement if you just sit down and concentrate on the technical analysis (charting tool) without further doing any homework on company's fundamental. The more activities you involve in the buying and selling various counters, the higher possibility is that you may lose focus and hence miss out the best opportunity. 

To treat shares investment as long term investment, first of all, you must be mentally prepared as well as just put in the excess cash and not the emergency fund into it. It is good that if you have set up your mind that the amount to be invested will be there for at least 5 years time and above. This will make you lesser worry even if the stock market collapse. You could just be patient and wait for the market to recover later. Secondly, try to use the dollar cost averaging method. As long as the share price is in the under valued - reasonable price range, you should continue your investing. Keep on searching for better alternatives at better price range while stay investing. Thirdly, never invest 100% in shares unless you pretty sure that you will no be affected mentally by 100% investing in equities. 

1 comment:

  1. i completely agree with you. there are too many speculators in current hot market. beware.


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