Greeting! We are in the second last month of 2012. Today is another Malaysia Holiday, hence in the midst of enjoying the holiday, I am thinking it would be good to give a brief update on what's happening in current market. Last month, US Dow index went as high as 13,610 point but today, the index is around 12,571. It's clearly this is a minor correction. However, my view is this create a opportunity for us to invest into “Great” company, if you plan to invest for long term.
Inflation or deflation better?
Some people blame the government that causing the inflation. For example, few years ago, with RM3, I can have a good breakfast. Today, I need to spend about RM6, to have a breakfast at McDonald. Many start to think, how nice if the price start to decrease... things just get cheaper, sound great? If this happen, the problem is your house value will go down, and your salary will go down as well. Assume you borrow $400k to buy new house, then 3 years later, the value become $300k but you still need to repay loan of $400k with the lower salary now, would you happy with it? This is what happened in Japan few years ago – deflation, which causing the changing of government. Since then, all the government in the world learn the lesson, try to print more money (to cheat people in a way), make everything goes up in price, so the houses value rise, people's salary increase, they feel more happy with inflation!
Why 90% of people lose money in stock market?
About 90% of people make a lot of money by investing in property, thanks to the inflation. However, it's less than 10% of people making money in stock market, if you are not in the 10%, then something could be wrong with your investment strategy.
For long term, only “Great” company will benefit from the inflation, remember, not simply choose any company for long term. You need to choose the company to invest, seriously and carefully.Few years ago, I recommended people to invest in Nestle and 2 years back in Dlady, these companies are great example for long term investment, the share price just go higher every year. You may email me if want to find out next company in this category.
The great company can be invest anytime, their price is hardly fall (because of inflation and growing population), hence any price correction is the best time to invest. Not long ago, I meat with a fried who bought Dlady's share 2 years ago and I thought he make a lot of money. However, he told me, no, he only make small money even Dlady's share price up by 300%. Why? Because he already sold the shares when the price up by 50%... The reason is he fear of choppy market especially follow by the news about Europe problem! This is another mistake, sell the great company too fast, great company need time to grow! Since the purpose of this investment is for long term, don't border about short term noise or news, you should use the bad news as your advantage to buy (if the price go down) but not as a reason to sell.
Long term means never sell, similar to holding the property asset!
Then another question come, should you sell Dlady if the price hit RM50 or Nestle hit RM70? My answer is NO. You should try to hold the great company as long as you can if the business continue to grow and the dividend continue to increase every year! I will consider to buy more if the price really fall! (never think of you try to sell Dlady at RM50 and buy it back at RM45, the tactic for short term is correct but for long term strategy is wrong!)
Short term investor can trade CIMBC25
The above is mean for long term, if you would like to trade for short term, then I recommend CIMBC25. You can refer to my previous email for details of CIMBC25. The price movement is slow and steady, currently is making the down trend movement, I am just waiting for the suitable time to buy. (CIMBC25 is for short term, hence, don't mix up with strategy for Dlady or Nestle)
Happy Investing!
