The STI index has gone up by another 5% to 6% since I took 2 weeks off. It is amazing that STI has gone up over 50% since March!
There are a lot of talks about Green shots and Bear rally at the moment. What I have seen right now is simply the cheap liquidity that we have now driving the market up. There is certainly sign of credit system back to normal and dry bulk activity has been buzzing lately. Crude oil price shot up to $68/barrel and steel prices also recovering to above $360/tonne. It is a complete sentiment shift from fears to euphoria!
Back to 1951, where Ben Graham interestingly describe on how the market behave each day in his book – Security Analysis (One of the greatest investment book ever wrote). There is this Mr. Market where he will come to offer you a price everyday. Someday, he is in very optimistic mood and he will come to offer you a very optimistic price. The other day, he suddenly becomes very pessimist and as if the world is collapsing. He offers you a fire sales price!
The most important lesson here is you never get influenced by the market sentiment. The only reason to buy stock is you are buying into a great business when Mr. Market offering you a fire sales price.
1. Save 20%-50% of you monthly salary from now for investment
2. Ensure that you have adequate saving for urgent need and not required from the investment money. (Depend on personal circumstances and needs. For young people without commitment, a saving for 3 months expenses is good enough)
3. Buy into Great Business during huge market correction (-3% to -5%) from now on
4. Avoid the hottest stock at the moment!
Tuesday, June 9, 2009
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